Markets both react to and anticipate economic reports. It seems there is always some economic data released each day with some having more impact than others. And mortgage rates are deeply tied to various reports as investors buy or sell mortgage bonds based upon their opinion of not just how the economy is doing now but where the economy might be six months from now. Investors typically don’t like to make investment decisions after being blindsided by some bit of economic data. Instead, investors anticipate where the economy might be based upon recent economic reports and trends. Yet none of these reports could have as much of an impact as one released February 1st. How so?
The Unemployment Report for the previous month is released on the first business Friday of each month. The first business Friday next month is the 1st, the date the January jobs numbers will be released. But first though, let’s jump back to the December jobs figures for a moment. December was much better than most analysts expected. Much better. Were the December numbers an aberration? Will there be a correction in January?
The unemployment rate actually increased in December but that’s not because the economy is slowing down, and people are losing their jobs. Quite the opposite. The economy is rather healthy right now and that means more people will start to look for work once again having decided to get out of the workplace altogether. Unemployment numbers only look at those who are out of work and actively looking and doesn’t count those who decide to leave the employment scene entirely. In December, around 419,000 people entered the workforce in search of work. There are more than seven million open jobs in today’s economy which is more than those officially declared as being unemployed.
People are jumping back into the workforce due to higher wages, as well. According to recent data, wages grew by 3.2 percent in 2018 and while at first glance that doesn’t seem like very much, it most certainly is. That’s the largest increase in wages in 10 years. Further, there were 312,000 new jobs created in December which was much more than most anticipated. But, again, will January show some sort of correction to those numbers…or confirm them?
That’s why February 1st is one of the more anticipated dates for investors in quite some time. If the economy shows another round of stout jobs numbers, it’s very likely we could see the Fed start to get back in the game. Fed Chair Powell has gone a bit back and forth over the past few months regarding when and if the Fed will raise the Federal Funds rate once again. Last fall, Powell suggested we could see two more rate increases in 2019 but later suggested that wasn’t necessarily written in stone and that the Fed would keep a close eye on the economy to see where it may be headed.
With another month of strong jobs numbers to join December’s count, it’s very likely we’ll see rates in general begin to rise, and mortgage rates will certainly follow suit if investors decide it’s time to pull money from bonds and more into stocks. For those who are waiting for rates to fall a little more, they might be waiting for a while.