On the first Friday of each month, the Bureau of Labor Statistics releases Non-Farm Payrolls data for the month prior.

The data is more commonly called “the jobs report” and it’s a major factor in setting mortgage rates for residents of Georgia and homeowners everywhere. Especially today, considering the economy.

This is because, although it’s believed that the recession of 2009 is over, there’s emerging talk of new recession starting.

Support for the argument is mixed:

1. Job growth has been slow, but planned layoffs touch a 10-year low
2. Consumer confidence is down, but beating expectations
3. Consumer spending is weak, but not declining

In other words, the economy could go in either direction in the latter half of 2010 and the jobs market may be the key. More working Americans means more paychecks earned, more taxes paid, and more money spent; plus, the confidence to purchase a “big ticket” items such as a home.

Jobs growth can provide tremendous support for housing, too.

Today, though, jobs growth was “fair”. According to the government, 54,000 jobs were lost in August, but that reflects the departure of 114,000 Census workers.  The private sector (i.e. non-government jobs), by contrast, added 67,000.

In addition, net new jobs was revised higher for June and July by a total of 123,000.  That’s a good-sized number, too.

Right now, Wall Street is reacting with enthusiasm, bidding up stocks at the expense of bonds — including mortgage-backed bonds.  This is causing mortgage rates to rise.  Rates should be higher by about 1/8 percent this morning.

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls data from the month prior.

The release is more commonly called “the jobs report” — a major factor in mortgage rates and monthly payments.

Especially now.

With the recession officially over and growth returning to the U.S. economy, the recovery’s next frontier is jobs. As job growth increases, home affordability should take a hit.  Here’s why:

1. As the number of working Americans increases, so should total consumer spending
2. As consumer spending increases, so should a return to risk-taking on Wall Street
3. As risk-taking returns to Wall Street, bond markets should start to lose

Mortgage rates, therefore, should rise.

Furthermore, as the jobs market stabilizes and recovers, renters should be more apt to buy their first home, and homeowners should be apt to up-size.  More Home Buyers in Blairsville means more competition for homes and higher home prices typically follow.

Job growth can be trickle-up for housing.

Today, however, the jobs data was not so strong. According to the government, 431,000 jobs were created in May, but of those new jobs, 95.4% represented temporary staffing for the 2010 Census.  The number of private-sector jobs created fell well short of expectations and Wall Street is voting with its dollars right now.  Mortgage bonds are gaining so, therefore, rates are falling.

The May 2010 jobs report may not reflect well on the economy, but home affordability in the North Georgia Mountains and around the country is improving because of it.

Consumer Sentiment has been on the rise since last February and it’s something to which Blairsville Home Buyers should pay attention.

The affordability of your next home may hinge on consumer confidence.

As the economy recovers from a near-the-brink recession, many of the elements of a full recovery are in place.  Business investment is returning, household spending is expanding, and financial systems are gaining strength.

Consumer confidence is at a 2-year high.

What’s missing from the recovery, though, is jobs growth.  Another net 20,000 jobs were lost in January. Data like that hinders economic growth.

That said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009, but it’s still a net negative number.  Not only does household income drop when Americans lose jobs but so does the average American’s confidence in his or her own economic future.

This is one reason why jobs growth is so closely watched by Wall Street — jobs are linked to higher confidence levels which, in turn, is believed to spur consumer spending.

Consumer spending represents 70% of the U.S. economy.

As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher.

Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.

Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.

This morning’s jobs report is causing mortgage rates to rise, capping a week during which rates have already jumped 3/8 percent off all-time lows.

The government’s November Non-Farm Payrolls report reinforced the notion that the recession is nearly over, if not over already.

Just 11,000 jobs were lost last month — much fewer than analysts had expected — as the Unemployment Rate fell to 10.0%.

If it seems strange to be talking economic recovery while Americans are still losing jobs – 7.2 million since 2008 –  remember that data always needs context.

See, analysts view employment figures as a lagging indicator for the economy.  This is because business owners tend to make hiring decisions based on how business has been – not on how it will be at some point in the future.

The jobs report rarely reflects the “right now”.  As an example, job loss peaked in January 2009 – 4 months after the height of the financial crisis.

We saw the same pattern during the Recession of 2001.

According to government data, during the last recession, job loss peaked in October 2001 but the recession ended the very next month.  It wasn’t until October 2002 that employment went net positive on a monthly basis.

And this is why investors are cheering November’s jobs report. Better-than-expected numbers and a falling Unemployment Rate show that the economy is improving.

Unfortunately for rate shoppers, better-than-expected data is pushing mortgage rates higher.  Rates are expected to open 0.250% higher versus yesterday’s close.

For August, the Case-Shiller Index showed annual home values improving across 19 of 20 U.S. markets. It’s the first time in 3-plus years that the benchmark housing index has shown such strength.

According to a Case-Shiller Index spokesperson, “The rate of annual decline in home price values continues to improve.”

It’s yet another sign that housing may have already bottomed.

However, just because the Case-Shiller Index shows a stabilization in home values, that doesn’t necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more “national”. It tracks data in just 20 U.S. cities.

Homeowners everywhere else are unaccounted for.

Furthermore, even within the 20 tracked Case-Shiller markets, there’s no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform.

Case-Shiller treats them all the same.

Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.

If that’s true, August’s Case-Shiller data is another step in the right direction.

Each month, the National Association of Home Builders releases its Housing Market Index report, a survey geared at taking “the pulse of the single-family housing market”.

Respondents report on three facets of their business, each series weighted and averaged:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the traffic of prospective buyers of new homes?

For the 3rd straight month, the Housing Market Index improved.  It’s now at its highest level since May 2008.

The housing market has shown signs of life since March.  Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns.  Builders showing confidence is another positive signal.

Fed Chairman Ben Bernanke said that the recession is “very likely over” and strong housing data corroborates that statement.

As the economy strengthens and housing does, too, home sellers will start to regain the upper-hand in contract negotiations.  If you’re an active home buyer, therefore, and looking for “a deal”, be aware that time is close to running out.

The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the U.S. economy is not slowing with the same speed versus just two months ago and that financial markets, in general, are improving. 

These are two signs that the country may be emerging from recession, if it hasn’t already.

The news isn’t all good, however.  The Fed made a point to highlight the potential hazards the nations faces on its path to economic recovery:

• The prices of energy and commodities have been rising
• Job losses are still mounting nationally
• Businesses are reducing capital expenditures

Also in its statement, the Fed acknowledged a plan to hold the Fed Funds Rate near zero percent “for an extended period” and a re-commitment to the U.S. Treasury and Mortgage Bond markets.

Market reaction to the Fed’s press release has been muted. 

With no new stimulus and no new “tools” to spur the economy unveiled, Wall Street is business as usual.  Mortgage rates are unchanged post-FOMC today.

The FOMC’s next scheduled meeting is August 11-12, 2009.

After Wednesday’s mortgage market rally drove rates down by a bunch, Thursday’s sell-off pushed them right back up.

This has been a common pattern in the skittish world of mortgage rates this year.

With the U.S. economy still teetering between recession and growth, markets are looking for signals anywhere it can find them.  Thursday’s clue came from a government report showing that more Americans are collecting unemployment benefits than at any point in history.

Strangely, mortgage rates rose on the news.

I call it “strange” because weak economic data has tended to draw mortgage rates lower lately to the benefit of prospective home buyers and would-be refinancers. Lower rates make homes more affordable.

Thursday, though, the pattern broke.

The main reason why mortgage rates rose Thursday isn’t because of the employment report or any other piece of data.  Rates rose Thursday for the same reason that they had dropped the day prior — the Federal Reserve.

On Wednesday, the released minutes from the Fed’s last meeting suggested that the group might make a larger mortgage market intervention.  On Thursday, in the face of worsening jobs data, markets bet the Fed wouldn’t.

Mortgage rate shoppers, unfortunately, got caught in the crosshairs.

Rates can — and do — change quickly, without warning.  And, thus far this year, the changes have been extra sudden.  This is one reason why it’s often prudent to lock a mortgage rate as soon as you find one that’s agreeable.  Wait too long, and it could be gone.

Expect more volatility today with traders leaving early for Memorial Day Weekend.  Less volume means more chances for rates to change.