For mortgages, the month's most important economic report comes Friday morning, when the Labor Department releases employment data for April. That's the top item on this week's economic calendar. According to Briefing.com, the consensus among economists is that the unemployment rate remained 9.7 percent, and that nonfarm payrolls ticked upward by 187,000 jobs.
That consensus comes from Briefing.com's survey of financial predictors. Briefing.com's own economists predict a rise in the unemployment rate, to 9.8 percent, and an increase in nonfarm payrolls of 200,000 jobs. I believe that the folks at Briefing.com are closer to the mark than the consensus is.
You might wonder why Briefing.com's job-creation guess is more optimistic than the consensus, yet the unemployment rate prediction is more pessimistic than the consensus. The reason is that the unemployment rate counts people who are looking for jobs. It doesn't count people who have given up and who are no longer looking. I have a hunch that some formerly discouraged people started sending out resumes again.
If the unemployment rate goes way up -- if it hits 10 percent again -- then there will be downward pressure on mortgage rates. Ditto if the nonfarm payrolls number is in negative territory, meaning that the economy shed jobs.
If the unthinkable happens, and the unemployment rate drops to 9.5 percent or lower, and nonfarm payrolls show healthy growth in the 400,000 range, then mortgage rates will rise. I'd say the odds of that happening are roughly the same as rolling boxcars.
On Thursday, the Bank of England and the European Central Bank will release their latest policy statements. What the Federal Reserve is to the dollar, the BOE is to the pound and the ECB is to the euro. With the debt crisis in Greece, and debt trouble in Ireland, Italy, Portugal and Spain, these policy statements will be watched closely. There could be spillover effects in U.S. debt markets, including the mortgage market.
If I were closing a mortgage within the next three weeks, I would lock my rate early this week, like by the end of Tuesday, because of European uncertainty. It's entirely possible that mortgage rates here could fall because of the debt crisis in the euro zone. But we're in volatile, unpredictable territory here. It feels safer to lock in an acceptable rate and sleep well.
This morning the Commerce Department released the report on March personal income and spending. Disposable personal income increased $32.3 billion in March, and personal spending increased $58.6 billion.
When spending increases twice as fast as income, it looks on the surface that consumers are behaving irresponsibly. But I think this report is skewed by wealth disparities. My guess is that the top 10 percent wealthiest households are responsible for a big chunk of this increase in spending. They're selling stocks to buy houses, cars and timepieces, which you and I call watches. The bottom 90 percent of households, in terms of wealth, are probably matching their spending with their incomes.