Employers added a net 163,000 workers to the national payroll in July. It was the strongest month for job gains since February. Revisions to the prior two month’s headline number subtracted 6,000 workers from the previously released headcount. That is the good news. The bad news is the national unemployment rate rose from 8.2% in June to 8.3% last month, even as more people gave up the search for work. The unemployment rate has been stuck above 8.0% for more than three years, the longest run since the Great Depression.
Selling pressure in the mortgage market reflects the initial knee-jerk reaction among some investors to this morning’s far stronger-than-expected headline employment number. While the sell-off must be respected, it is important to bear-in-mind nonfarm payroll reports tend to be quirky this time of year. I suspect calmer, cooler heads largely anticipate the July pace of payroll growth with be very difficult to sustain over the next few months. If my assessment proves accurate, the selling pressure the mortgage market is currently experiencing will abate significantly by next week Tuesday or Wednesday. I’m not suggesting a rally will ensue – I just see a number of reasons, both fundamental and technical, to anticipate at least a leveling off from today’s climb to higher rates will probably occur in the earlier part of the coming week.
Uncle Sam will be conducting a three-part Treasury auction during the middle three-days of the coming week. First up on the auction block will be a $32 billion stack of 3-year notes on Tuesday, followed by the sale of $24 billion of 10-year notes and concluding on Thursday with a $16 billion bundle of 30-year bonds. All three offerings are expected to draw strong enough demand that they will exert little, if any influence on the current level of mortgage interest rates.
Wednesday’s release of the government’s first “quesstimate” for Q2 Productivity and Unit Labor Cost joins Thursday’s initial weekly jobless claims and Wholesale Inventory numbers in a lackluster macro-economic report schedule.
30 year fixed 3.25% 0% origination fee
30 year fixed rate 3.50%
15 year fixed rate 2.875%
5/1 ARM 2.375%
7/1 ARM 2.75%