The October Jobs Report didn't cause much of a shake up with steady job growth and unemployment.
U.S. employers added 161,000 new jobs in October, which was below expectations, the U.S. Bureau of Labor Statistics reported. That being noted, both August and September numbers were revised up by a total of 44,000. Job gains continued to trend up in health care, professional and business services, and financial activities. New jobs have averaged 181,000 per month in 2016, compared with 229,000 in 2015. Meanwhile, the Unemployment Rate ticked down to 4.9 percent from 5.0 percent and has changed little since August 2015.
Average hourly earnings rose by 0.4 percent. On a year-over-year basis, average hourly earnings grew at a new post-crisis high of 2.8 percent over the previous year.
The inflation-measuring Personal Consumption Expenditures (PCE) was inline with expectations and still tame, running below the Fed's 2 percent target. Core PCE, which excludes volatile food and energy readings, rose 0.1 percent in September from August. In the 12 months through September, Core PCE increased 1.7 percent after a similar increase in August.
Inflation trends are important to watch because inflation reduces the value of fixed investments, like Mortgage Bonds. When inflation rises, it can impact home loan rates, since they are tied to Mortgage Bonds.
The Federal Open Market Committee considered trends in inflation, the labor sector and more when deciding to keep its benchmark Fed Funds Rate unchanged at its November meeting. This is the rate banks lend money to each other overnight. When this rate changes, other rates can change as well.
For now, home loan rates remain just above all-time lows.
If you or someone you know has any questions, please don't hesitate to contact me.
Forecast for the Week
The presidential election will overshadow what minimal economic data is released this week.
Weekly Initial Jobless Claims will be reported on Thursday.
The Consumer Sentiment Index will be released on Friday.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.
When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.
To go one step further, a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, Mortgage Bonds have stabilized recently, keeping home loan rates near historic lows.
Chart: Fannie Mae 3.0% Mortgage Bond (Friday Nov 04, 2016)