This week brings us the release of five monthly or quarterly economic reports that are likely to influence mortgage rates. The week opens and closes with key reports for the markets to digest and in between is some moderately important data. With relevant data scheduled for release every day, we should see another active week for mortgage rates.
Starting this week’s calendar will be the Institute of Supply Management's (ISM) manufacturing index for January at 10:00 AM ET tomorrow. This index tracks manufacturer sentiment by rating surveyed trade executives' opinions of business conditions. It is usually the first economic data released each month and is one of the very important reports we get monthly. Current forecasts are calling for a reading in the neighborhood of 48.3, which would be an increase from December's reading of 47.2. The lower the reading, the better the news for the bond market and mortgage rates because weaker sentiment indicates a slowing manufacturing sector. Also worth noting is the fact that this index has remained under the key threshold of 50.0 for the past several months that is a recessionary sign for the manufacturing sector.
December's Factory Orders data is set for release late Tuesday morning. It is similar to last week's Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 1.2% rise in new orders, indicating a stronger manufacturing sector. The bond market would like to see a large decline, meaning that manufacturing activity was even weaker than many had thought.
Next up is Wednesday's ADP Employment report at 8:15 AM ET. 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 job, using the company's payroll processing clients as a base. While it does draw attention, it is my opinion that it is overrated and 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 see a reaction to its results, it is included in this week's calendar. Analysts are expecting to see 156,000 new jobs. Good news would be a much smaller number of jobs.
Employee Productivity and Costs data for the 4th quarter will be released early Thursday morning. It can cause some movement in the bond market but should have a minimal impact on mortgage pricing. If the productivity reading varies greatly from analysts' forecasts of a 1.6% increase, we may see some movement in mortgage rates. Higher levels of worker productivity is good news for the bond market because it allows the economy to expand while keeping inflation subdued.
Friday has the biggest news of the week. The Labor Department will release the almighty Employment report for January at 8:30 AM ET. 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 no change in the unemployment rate of 3.5% and approximately 160,000 new jobs added to the economy while earnings rose 0.3%. 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 strength of economy and would likely lead to a sizable improvement in mortgage pricing.
Overall, Friday is easily the best candidate for most important day of the week due to the importance of the Employment report, although we could see plenty of movement in the markets and mortgage rates tomorrow also. The calmest day will probably be Tuesday unless something unexpected happens. We also need to watch for Coronavirus updates that may come into play at any time. Everything points towards another very active week for mortgage rates, so please keep an eye on the markets if still floating an interest rate and closing in the near future.