15 year fixed rate 2.75%, 30 year 3.5%

Quite a roller coaster the last 24 hours.  Yesterday saw rates shoot up as new unemployment claims came in at the very low end of expectations, 365,000. Conversely we saw last week’s numbers revised up by 4,000 and the four week moving average climb to 371,250.  Those numbers alone shouldn’t move the market much as they net out to a very slight improvement.  But two factors came into play:
First the ADP jobs report, a notoriously inaccurate  monthly precursor to today’s employment report, came out considerably stronger than any expectation.  The consensus for ADP was that we had created 149,000 jobs last month.  The ADP report showed 201,000 jobs created.  That number of job creation would be a huge boost for the economy and investors starting selling bonds, raising rates. 
Then the European Central Bank issued a statement that they would be selling far more bonds than expected to resolve the European crisis, placing even more pressure to raise rates on US bonds.  In response, the 10 year T-bill jumped almost 10 basis points, from 1.59% to 1.68%.  Mortgage rates reacted even more strongly, fearing the double whammy of Thursday’s news and a great economic report today, pushing 30 year rates up to 3.75%. 
Then this morning hit.  The official jobs number came out at a very disappointing 96,000 when the consensus (issued before yesterday’s optimistic ADP report came out) was 125,000.  Then to add insult to injury, July’s strong numbers were revised down from a very good 163,000 to a much more mundane 141,000 and June’s numbers from a weak 64,000 to a dismal 41,000.  The one seemingly bright spot for the economy was unemployment was down from 8.3% to 8.1%.  Looking at the jobs numbers most people would wonder how, mathematically, we could be so low on jobs and still have unemployment drop.  Two factors:  the first is that the 8.3% number  was rounded up and 8.1% is rounding down. Secondly, the workforce shrank.  348,000 previous job seekers retired or gave up looking for a job. 

For mortgage rates, we are headed into the weekend with 30 year rates sitting solidly at 3.5% and fifteen year rates pushing towards 2.75%.

Wednesday I commented that this report might decide the election and everything this morning went solidly against the President and in the favor of the GOP.  We will probably hear the Dem’s attempt to promote the drop in unemployment hoping that the details don’t have traction.  The GOP will tout the weak job growth, the (now) lack of good trend in job growth and the number of people “giving up hope”.  While two additional reports will come out on jobs before the election, the question becomes; whether any good news will be too late and/or strong enough to change opinions that have already been formed.

It is also interesting to re-evaluate the President’s speech last night given our knowledge of today’s reports.  Many political commentators were surprised at the speech and how much it varied from the pre-speech notes handed out by the campaign.  Given that the White House got these reports yesterday, we have to wonder if, or how much of the speech was modified late yesterday so not to have today’s report undermine the impact of the speech.

Response to some feedback on Wednesday’s final comment of:  “remember that political “facts” are the same as “internet facts”; just because they say it doesn’t mean it’s accurate.” 
If you look up at today’s number’s, even though it’s a poor set of reports for the Dems, they can claim numbers that support their position that the economy is improving.  For instance, “Unemployment dropped to 8.1% from 8.3%!”  It’s absolutely truthful  but it doesn’t mean the economy is improving to the degree that is implied.  It is truthful but not necessarily accurate.  The other report numbers confirm it.  Both parties and most all political pundents do this to support their position.  I just encourage everyone to look beyond the rhetoric and know the facts.

Have a great weekend.