This week does not have a large number of economic reports or other events scheduled that are expected to directly affect mortgage rates. However, the short list does include an extremely important release that usually causes noticeable volatility in the markets. The general theme of the week is employment data with two monthly reports in addition to the weekly unemployment update. We can also expect stocks to affect trading as concerns grow about the lasting impact the pandemic will have on the business world and corporate earnings.
February's Factory Orders will start this week’s calendar at 10:00 AM ET tomorrow. 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. It will give us a measurement of manufacturing sector strength but is considered to be only moderately important to the bond and mortgage markets. That is partly because a big portion of the data was already released with the Durable Goods Orders report. The data will likely have a minimal impact on tomorrow's mortgage rates, even if it shows a larger decline than the 9.0% that is expected.
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, using ADP's clients that use them for payroll processing as a base. 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 do often see a reaction to the report, we should be watching it. Analysts are expecting it to show that approximately 20 million private sector payrolls were lost last month. The larger the decline, the better the news it is for mortgage rates.
1st Quarter Productivity and Costs data is set for release at 8:30 AM ET Thursday. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. This update will likely be a non-factor for rates though because the heavy impact from the pandemic will make the data practically useless.
The biggest economic news of the week will come early Friday morning when the Labor Department posts April's Employment report, revealing the U.S. unemployment rate, the number of jobs lost during the month and earnings data. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate spiked to 16% and that approximately 21 million jobs were lost during the month. A higher unemployment rate and a larger decline in the payroll number would be good news for bonds and rates because it would indicate weaker than thought conditions in the employment sector of the economy. However, much stronger than expected results will probably boost stocks and lead to bond selling, possibly causing an increase in mortgage pricing.
Overall, the Employment report makes Friday the most important day by default, but we could see rates move noticeably multiple days. This is especially true if stocks make a big move higher or lower. Futures trading currently point towards a weak open for stocks, which should help boost bond prices and lower yields tomorrow morning if that continues overnight.