Major economic data and uncertainty about future Fed policy produced another volatile week for mortgage rates. Labor market weakness helped mortgage rates end the week lower.
The most significant economic data this week was Friday's monthly Employment report. Against a consensus forecast for a gain of 75K, the number of jobs remained unchanged in August, and the data for June and July was revised lower by 58K. The Unemployment Rate remained at 9.1%. Average Hourly Earnings, a proxy for wage growth, unexpectedly declined from July. In short, it was a weak report in nearly every area, and that was favorable for mortgage rates.
The economic data gained even more importance in light of the detailed Fed minutes from the August 9 FOMC meeting which were released on Tuesday. The minutes revealed that Fed officials were deeply divided about what to do. Some officials felt that the high unemployment rate and the downside risks to the economy justified easing monetary policy, while others questioned whether additional easing would have a significant impact. The decision to extend the pledge for low fed funds rates for two years was a compromise. Weaker than expected economic data, such as the August Employment report, supports the case for looser monetary policy. The next FOMC meeting, scheduled for September 21, has been extended to a second day to allow more time for discussion, and the Fed's announcement will be very important for financial markets.
Also Notable:
| Week Ahead The biggest economic news next week is likely to be an announcement from the Obama administration about a new fiscal stimulus proposal to help the economy and the job market. Its release date is currently scheduled for Thursday evening. The Economic Calendar will be very light next week. ISM Services will come out on Tuesday. The Fed's Beige Book will be released on Wednesday. The Trade Balance will come out on Thursday. Mortgage markets will be closed on Monday for Labor Day. |
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