This week brings us the release of five monthly or quarterly reports that have the potential to affect mortgage rates, two of which are considered to be major releases. The stock and bond markets are closed tomorrow in observance of the Labor Day holiday and will reopen for regular trading Tuesday morning. Accordingly, there will be no update to this report tomorrow.
The Institute for Supply Management (ISM) will open the week’s calendar late Tuesday morning when they post their manufacturing index for August. This very important index measures manufacturer sentiment and is expected to show a reading of 57.6, down from July's 58.1. A reading above 50 is considered a sign of economic growth because it means that more surveyed manufacturers felt business improved during the month than those who felt it had worsened. A decline in the index would likely cause selling in the stock markets and lead to an improvement in mortgage rates Tuesday.
Next up is August’s ADP Employment report before the markets open Thursday. This release has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs, using the company's payroll processing clients as a base. I don't have much faith in the data but the markets do react to it, so we watch it. It is expected to show 186,000 new private-sector jobs were added last month. A higher number would be negative news for mortgage rates while a much smaller than expected increase would be favorable.
The second report of the day will be revised 2nd Quarter Productivity numbers that measure employee productivity in the workplace. Strong levels of productivity allow the economy to expand without inflation concerns. It is expected to show no change from the previous estimate of a 2.9% increase. Good news for the bond market and mortgage rates would be an upward revision in productivity, but this report doesn't usually cause much movement in rates.
July's Factory Orders data will finish Thursday’s schedule at 10:00 AM ET. This report measures manufacturing sector strength and is similar to the Durable Goods Orders release the week before last, but includes orders for both durable and non-durable goods. It is expected to show a 0.6% decline in new orders. A larger than expected decline would be favorable for bonds, but I don't see this data causing much movement in rates unless its results vary greatly from forecasts since the big-ticket products portion of the report was released already.
That takes us to Friday and the almighty monthly Employment report at 8:30 AM ET. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for this month. The ideal scenario for the bond market and mortgage rates is rising unemployment, a drop in payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate remain unchanged at 3.9% and that 187,000 jobs were added during the month. The average earnings reading is forecasted to rise 0.2%. Weaker than expected readings would signal employment sector weakness and would be very good news for bonds and mortgage rates Friday. However, if we get stronger than expected numbers, mortgage rates will probably move higher.
Overall, Friday is likely to be the most active day for mortgage rates, but we could see noticeable movement Tuesday also. The best candidate for calmest day is Wednesday, assuming stocks don’t rally or go into selling mode. This will probably be an active week for mortgage rates in general, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.