This week brings us the release of four economic reports for the markets to digest with two of those reports being much more important than the others. In addition to the data, there are also a high number of speaking engagements by Federal Reserve members that may draw attention. For the week we can expect to see a fair amount of movement in rates, but the moves likely will come over just a couple days.
The first release of the week will come from the Institute for Supply Management (ISM), who will post their manufacturing index at 10:00 AM ET tomorrow. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report that tracks the preceding month's activity. Tomorrow's release is expected to show a September reading of 60.4, indicating that manufacturer sentiment softened from August's 61.3 reading. This means fewer surveyed executives felt business improved during the month than in August, hinting at a slowing manufacturing sector. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates tomorrow.
The second report of the week will be September's ADP Employment report before the markets open Wednesday. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers than expected. 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 follows a couple days later. Still, because we have seen reaction to the report, we should be watching it. Analysts are expecting it to show that 184,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
August's Factory Orders data will be released late Thursday morning. This Commerce Department report is similar to last week's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 1.8% rise in new orders from July's level. A large decline would be good news for the bond market and mortgage rates while a larger than unexpected rise would be bad news and could push rates slightly higher Thursday morning since it would indicate economic strength.
The last report of the week is the most important. Friday brings us the release of the monthly Employment report. The Labor Department will post September's employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for the unemployment rate to slip from 3.9% in August to 3.8% last month, an increase in payrolls of approximately 185,000 and a 0.3% increase in average earnings. Weaker than expected readings should rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, the single most important day is Friday but tomorrow is likely to be pretty active also. Thursday will probably be the calmest day unless something unexpected happens. Besides the relevant economic data set for release three days of the week, the fairly full Fed speaking schedule can also cause volatility in the markets at any time, particularly Fed Chairman Powell’s Tuesday speech This leads me to believe that we will see an active week for mortgage rates. Accordingly, please maintain contact with your mortgage professional if still floating a rate and closing in the near future.