How Did The Employment Report Affect Mortgage Rates?

Mortgage rates continued to march upward yesterday as fixed income investors extended profit taking strategies and set up positions for the release of Non-Farm Payrolls data today. As a reminder, when mortgage-backed securities prices move lower, lenders are forced to offer higher mortgage rates. If MBS prices move higher, lenders can offer lower mortgage rates because they can sell loans their pipeline of loans for a greater price.

The U.S. Department of Labor released the monthly Employment Situation Report this morning.  This data provides the market with four measures on the the health of the labor market.

1. The number of jobs lost or created from the prior month. Last month showed that our economy shed 190,000 jobs.
2. The official unemployment rate, which hit a 26 year high of 10.2% last month.
3. The average work week, which was 33.0 hours last month.  If the average work week increases, that would indicate the average worker making more money due to more hours worked.  With the additional earnings, the worker now has more money to spend into the economy which is positive for stocks. 
4. Average hourly earnings, which shows us if hourly earnings are increasing or decreasing from the prior month. 

In November, our labor market lost only 11,000 jobs! Economists were expecting 130,000 cuts.

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