Will Mortgage Rates Start Rising After Friday’s Non-Farm Payrolls Report?



On the first Friday of each month, the Bureau of Labor Statistics publishes its Non-Farm Payrolls report.

Commonly known as "the jobs report", Non-Farm Payrolls highlights employment changes across 10 private labor market sectors, including insurance and finance.

Wall Street watches Non-Farm Payrolls data closely for two main reasons.

First, jobs and the broader labor market are linked to the U.S. economy's health -- both today and in the future. Second, because jobs are also linked to future Federal Reserve policy.

The Federal Reserve is the nation's central banker.

But that's not all. The monthly jobs report is of import to "Main Street", too.

This is because the government's monthly Non-Farm Payrolls report affects current mortgage rates -- often harshly. It's one of the major reasons why Fridays are the second hardest day on which to lock a mortgage rate.

The next jobs report will be released Friday, February 5, at 9:00 AM ET. If you're currently shopping for a mortgage or floating mortgage rates with a lender, consider locking in before Friday.



The Non-Farms Payrolls report is a broad look at the U.S. labor market.

Broken down by industry, it shows in which sectors the jobs market is expanding, and in which sectors the jobs market is contracting. It also tallies the size of the U.S. workforce to derive the national unemployment rate.

Not surprisingly, the Non-Farm Payrolls is a monthly Wall Street highlight. This is because job growth is paramount to economic growth, and economic growth drives investment strategy.

In recent years, the jobs report's importance has been magnified.

Since December 2008, when the Federal Reserve lowered the Fed Funds Rate to near zero percent, it said that the benchmark borrowing rate would remain near zero so long as labor market conditions warrant.

7 years later, that day arrived.

On December 16, 2015 -- exactly 7 years after the Fed began its zero-interest rate policy -- the group's zero-interest policy ended. The Fed voted to raise the Fed Funds Rate to a target range near 0.25%.

When the Fed Funds Rate is increased, it's a move that's meant to slow the U.S. economy.

Fortunately for today's home buyers and homeowners looking to refinance, the Fed's move commenced a Wall Street shift into "safe" market assets, including mortgage-backed securities (MBS), which has led mortgage rates lower since the start of the year.

The Fed doesn't control mortgage rates, but its policies can influence them. Today's mortgage rates are the lowest they've been in 10 months.

Use a home mortgage calculator to see what you'll pay to own a home.



It's also important to recognize that the U.S. labor market is tightly tied to the U.S. housing market.

Jobs provide households with income, confidence and capital; and, confident persons are more likely to buy a home or relocate.

Meanwhile, as the number of buyers in a market grows, the supply-and-demand curve shifts, which results in higher prices for sellers and the creation of real wealth. This, too, can boost confidence.

Also, employed persons are also more likely to be mortgage-approved.

Even before your first day of work, you can get a loan via the offer letter mortgageIt's no coincidence, then, that the labor market's rebound has coincided with a rise in U.S. home values.

Nationally, home values have recovered all of last decade's losses and some markets -- including Phoenix, San Francisco and Los Angeles --  have made remarkable gains.

Rising home prices would typically be bad for a buyer's purchasing power, but with 30-year mortgage rates now firmly below four percent, home affordability remains high.

Homes are selling quickly, too.

Recent data from the National Association of REALTORS® shows a large percentage of all homes selling in 30 days or fewer; and, a shrinking supply of homes nationwide.

Both are contributing to rising home values and that trend is expected to last through 2016.

At some point, though, mortgage rates will rise and, when they do, it will harder to make payments on a home. That change could come as soon as Friday, when the Non-Farm Payrolls report hits.



Between 2008-2009, the U.S. economy fell into recession, catalyzed by the failure of Lehman Brothers; the near-collapse of mortgage lending; and the movement of Fannie Mae and Freddie Mac into conservatorship by the Federal Home Finance Agency (FHFA).

7.4 million jobs were eliminated.

Since that period, though, hiring has resumed. 12.9 million jobs have been added back to the U.S. economy -- a 174-percent recovery in terms of "employed persons".

Today's jobs may not be of equal pay or stature, but an increase in the number of employed persons is still a net-positive for the economy. Furthermore, unemployment rates are low.

The current unemployment rate is down more than four percentage points from its peak last decade.

Should the January Non-Farm Payrolls data read stronger-than-expected, then, the Fed may feel compelled to raise the Fed Funds Rate at its next meeting, which is scheduled for mid-March.

Looking ahead to the jobs report, analysts expect to see that 180,000 net new jobs were created in January, with estimates ranging from one-hundred-seventy thousand to two-hundred-fifteen thousand.

A stronger-than-expected read will lead mortgage rates lower.

Consider locking your mortgage rate before the Friday morning release is made. Once the jobs report hits, it may be too late to get locked.