Thursday, January 6, 2011

Market UpDate W/Labor Department Stats

Thursday’s bond market has opened in positive territory after this morning’s only economic data gave us favorable results. The stock markets are also helping to boost bond prices with losses in the Dow of 43 points and the Nasdaq 3 points. The bond market is currently up 9/32, but we will still see an increase of approximately .125 - .250 of a discount point in this morning’s mortgage rates due to weakness in trading late yesterday.
The Labor Department gave us this morning’s only economic data with the release of last week’s unemployment figures. They reported that 409,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 391,000 and higher than forecasts. Last week’s report that tracked the previous week’s claims initially showed 388,000 claims that had surprised many people. This means that the holiday schedule and weather likely did artificially influ ence those numbers and that the labor market did not improve as much as some wanted us to believe. That is good news for the bond market and mortgage rates because the weak employment sector has helped limit economic growth, making longer-term securities such as mortgage-related bonds more attractive to investors. Unfortunately, since this data tracks only a single week’s worth of new claims, its impact on mortgage rates is usually minimal.
Tomorrow morning will have the Labor Department in a much brighter spotlight than today. They will post December’s monthly employment figures early tomorrow morning, with all eyes looking at the headline numbers. This report is arguably the most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, smaller than expected increase in new payrolls and a decline in earnings would be ideal news for the bond market.

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