The jobs market held steady in December, even as Congress wrangled over tax increases and spending cuts, the monthly employment report shows. It was released today by the Department of Labor.
But steady isn’t good enough in the eyes of investors. The 155,000 jobs added to the economy in December weren’t enough get Wall Street excited. The unemployment rate has been stuck at 7.8 percent since September. (The November rate was revised up from 7.7 percent.)
"Market effects should be limited because this report was much as expected," says Nigel Gault, chief U.S. economist at IHS Global Insight.
What does that mean for mortgage rates?
Mortgage rates normally snooze when expectations for certain economic reports are met. The mortgage market doesn’t react well to surprises.
But the market got an unexpected reminder from the Fed on Thursday: The quantitative easing program, or QE3, that has artificially kept mortgage rates down has to end at some point -- possibly before the end of this year.
Minutes of the last Federal Open Market Committee meeting, released this week, show that some members said the Fed should end the economic stimulus before the end of the year.
The Fed has been investing a total of $85 billion per month in mortgage bonds and U.S. Treasuries. That’s one of the main reasons mortgage rates have stayed low for so long.
The mere mention that the Fed may consider ending the program was enough to push bond and Treasury yields up on Thursday afternoon.
The yield, or rate of return, on the benchmark 10-year Treasury note was 1.93 percent as of Friday morning, up from 1.86 percent on Wednesday at closing. The yield on the 30-day Freddie Mac note rose to 2.97 percent by the end of Thursday, up from 2.83 on Wednesday afternoon.
A negative jobs report would have helped push the yields down. Mortgage rates normally follow the same direction as mortgage and Treasury bond yields.
But even with not much change in the jobs market for December, the report can be perceived as positive.
"The labor market is better off because we are adding enough jobs to bring down the unemployment rate -- though only very gradually," Gault says.
Mortgage professionals say borrowers still sitting on the sidelines should get moving. Take advantage of the low mortgage now before it’s too late, they say.
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