This week has six pieces of monthly and quarterly economic data scheduled for release that may influence mortgage rates. One of those reports is extremely important to the financial and mortgage markets. The week starts light with nothing of importance set for tomorrow.
The week will start with January's New Home Sales report at 10:00 AM ET Tuesday morning. This is the least important report of the week and is the sister report to the Existing Home Sales release that was posted two weeks ago. It measures housing sector strength and mortgage credit demand, but usually does not have a significant impact on bond trading or mortgage rates unless it shows a significant surprise. Tuesday's report is expected to show a decline in sales of newly constructed homes, hinting at weakening in the new home portion of the housing sector. The smaller the number of sales, the better the news it is for bonds and mortgage rates.
Wednesday has an early morning report and an afternoon release that we will be watching. The first comes at 8:15 AM ET from payroll processor ADP who will announce their monthly private-sector employment prediction. Since it is not a government agency report, it isn't considered to be highly important. However, as with any employment-related data, it does draw some attention. This is especially true for this report because it is posted just a couple days before monthly employment figures are released by the Labor Department. I personally believe it is given more attention than it really deserves, particularly because many use it to predict the monthly government figures but often without success. Still, if it shows a noticeable variance from expectations, it will likely cause movement in the markets and mortgage rates. Forecasts are calling for it to show 175,000 new payrolls.
The Fed Beige Book is the afternoon release. This report details economic activity throughout the country by Federal Reserve region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during mid-afternoon afternoon trading Wednesday. It probably will not cause a major sell off in the stock or bond markets, but the 2:00 PM ET release is still worth watching.
Next up is the revised Productivity Index for the 4th Quarter of last year early Thursday morning. Analysts are expecting to see an increase of 1.6% . Employee productivity is watched fairly closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns. This release also includes a labor costs reading that can be quite influential if it shows a surprise. However, since this data is quite aged now, it likely will have little impact on mortgage rates unless it shows a significant change.
The biggest news of the week comes early Friday morning when one of the single most important monthly reports we see will be posted. The Labor Department will post February's Employment report at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for a 0.1% decline in the unemployment rate from January's 4.0%, approximately 175,000 new jobs added to the economy and a 0.3% rise in earnings. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the economy's ability to continue to grow that would have an opposite impact on the markets and mortgage pricing.
January's Housing Starts will close out the week’s calendar, also early Friday morning. This is another housing sector report but tracks new home groundbreakings. It usually does not affect rates unless the results vary greatly from forecasts. Current forecasts are calling for an increase in construction starts of new housing. A weak housing sector makes broader economic growth less likely in the near future, which makes bonds more attractive to investors. Therefore, the smaller the number of starts, the better the news it is for mortgage rates.
Overall, Friday is the easy choice for most active day due to the importance of the Employment report. Wednesday could also be pretty active for mortgage rates with two reports. The calmest day will probably be tomorrow or Tuesday unless stocks make a noticeable move either direction. Despite the lack of a high number of economic releases, we still should see a good amount of movement in mortgage rates over the next five days. Accordingly, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.