This week only has four reports scheduled for release that are likely to affect mortgage rates. One of those reports is extremely important to the financial and mortgage markets, so the lighter schedule doesn’t necessarily mean a calm week for rates. In addition to the economic reports, there are quite a few speaking engagements by current Fed members the first half of the week, including Chairperson Yellen, that always draw attention as traders look for any surprises or hints towards future monetary policy moves.
The week’s calendar begins tomorrow with the release of February's Factory Orders at 10:00 AM ET. This data is similar to the Durable Goods Orders report that was posted the week before last, except it includes orders for both durable and non-durable goods and gives us another measurement of manufacturing sector strength. It is considered to be only moderately important to the bond and mortgage markets, so unless it varies greatly from forecasts of a 2.1% increase, I suspect that the data will have a minimal impact on tomorrow's mortgage rates.
Tuesday has nothing in terms of economic reports that we need to be concerned with, but Wednesday has two. The ADP Employment report is set for release early Wednesday morning, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of ADP's clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we do often see a reaction to the report, we should be watching it. Analysts are expecting it to show that 189,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
The second report of the day will come from the Labor Department, who will release its 1st Quarter Productivity and Costs data during early morning hours. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a sizable decline could cause bond prices to drop and mortgage rates to rise slightly Wednesday morning. It is expected to show a 1.9% drop in worker productivity during the first three months of the year.
The biggest news of the week will come early Friday morning when the Labor Department posts March's Employment report, revealing the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate slipped from 5.5% to 5.4% and that approximately 213,000 payrolls were added to the economy during the month. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and would likely push mortgage rates lower Friday morning because it would indicate weaker than thought conditions in the employment sector of the economy. However, stronger than expected results would probably fuel a stock rally and bond selling that leads to a sizable increase in mortgage pricing.
Overall, Friday is the single most important day of the week due to the significance of the monthly Employment report. Wednesday could be active also with a couple reports and Janet Yellen’s speech. Thursday is the best candidate for lightest day with exception to traders making adjustments before Friday key economic release.