This week brings us the release of six economic reports that have the potential to influence mortgage rates. Tomorrow is the only day of the week without at least one report scheduled, but the calendar starts Tuesday with one of the more important releases we get each month.
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 small change from July's 54.2. 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 Wednesday. 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 to accurately reflect the status of the employment sector, but the markets do react to it. It is expected to show 1.2 million new private-sector jobs were added during the month following July’s highly disappointing 167,000 new payrolls. A higher than expected number would be negative news for mortgage rates while a much smaller than expected increase would be favorable.
July's Factory Orders data is also set for Wednesday, but at 10:00 AM ET. This report measures manufacturing sector strength and is similar to the Durable Goods Orders released last week but includes orders for both durable and non-durable goods. It is expected to show a 5.5% increase in new orders. A smaller than expected increase would be favorable for bonds, but this data likely won’t cause much movement in rates unless its results vary greatly from forecasts since the big-ticket products portion of the report was released already.
Wednesday's third release will come during afternoon hours when the Federal Reserve will release its Beige Book. This report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises or changes from the previous release, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's future actions to support the economy.
Besides the weekly unemployment update that comes each Thursday morning, this week also has the revised 2nd Quarter Productivity numbers scheduled for release that measure employee productivity in the workplace. Strong levels of productivity allow the economy to expand without inflation concerns. It is expected to show a 7.0% increase in productivity, down from the initial estimate of 7.3%. 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.
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 last month. The ideal scenario for the bond market and mortgage rates is rising unemployment, a drop in the number of new payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate slipped to 9.9% from July’s 10.2% and that 1.45 million jobs were added during the month. The average earnings reading is forecasted to be unchanged from July. Weaker than expected readings would signal the employment sector is in worse shape than thought and would be very good news for bonds and mortgage rates. However, if we get stronger than expected numbers, mortgage rates could move higher Friday.
Overall, Friday is the most important day of the week due to the importance of the Employment report. Tuesday may also be active though since the ISM Index is also considered to be a major release. The calmest day for rates may be tomorrow or Wednesday if the ADP report doesn’t show a significant surprise. Even though we don’t have a large number of events scheduled this week, we do have some extremely important data that is likely to make this an active week for rates.