Next Friday's Employment Number May Be A Market Mover
Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower.The US dollar continued to strengthen.Oil remained volatile and initially improved from the strengthened dollar.Unfortunately oil prices pushed higher the end of the week, which reignited inflation fears as Gustav threatened the Gulf of Mexico.Fears of refinery disruptions increased.
For the week, interest rates on government and conventional loans fell by about 1/2 of a discount point.
The employment report Friday will be the most important event this week.The bond market is closed Monday in honor of Labor Day.The shortened trading week may lead to market volatility when trading resumes Tuesday following the extended holiday weekend.
Employment
The employment report provides an abundance of information for almost every sector of the economy. Not only does the employment report give basic employment payroll statistics for the major working sectors, it also provides the average hourly earnings and the average workweek.Using this information provided by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor, economists estimate many other economic indicators such as industrial production, personal income, housing starts, and GDP monthly revisions. Since there is little data for economists to base their estimates on, the margin of error for the estimates tends to be high. As a result, the employment report can cause substantial market movements. The BLS compiles data from two unrelated surveys that they conduct, the household survey and the establishment survey, in order to complete the employment report.This explains why sometimes there is an unexpected divergence
between the unemployment rate and payrolls figures each month.
Analysts currently debate the Fed’s next move.While the Fed’s primary focus is curtailing inflation, the current dilemma is doing so without damaging the already weakened economy.This week’s employment data will provide valuable insight into factors the Federal Open Market Committee will use to make future rate decisions.
Looking Ahead
Economic
Indicator
Release
Date and Time
Consensus
Estimate
Analysis
Construction Spending
Tuesday, Sept. 2,
10:00 am ET
Down 0.4%
Low importance.An indication of economic strength.A significant decrease may lead to lower rates.
ISM Index
Tuesday, Sept. 2,
10:00 am ET
49.5
Important.A measure of manufacturer sentiment.A large decline may lead to lower mortgage rates.
ADP Employment
Wednesday, Sept. 3,
, et
Down 19k
Moderately important.A large decrease in payrolls may bring lower rates.
Factory Orders
Wednesday, Sept. 3,
10:00 am, et
Up 0.4%
Important.A measure of manufacturing sector strength.Weakness may lead to lower rates.
Fed “Beige Book”
Wednesday, Sept. 3, , et
None
Important.This Fed report details current economic conditions across the US.Signs of weakness may lead to lower rates.
Revised Q2 Productivity
Thursday, Sept. 4,
, et
Up 2.9%
Important.A measure of output per hour.Improvement may lead to lower mortgage rates.
Employment
Friday, Sept. 5,
, et
Unemp. @ 5.7%,
Payrolls -70k
Very important.An increase in unemployment or a larger decrease in payrolls may bring lower rates.
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