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Ouchy jobs report

By Holden Lewis ·
Friday, February 4, 2011
Posted: 9 am ET

A brutal employment report today bodes well for mortgage rates. Borrowers, rejoice in the bad news!

The economy added 36,000 jobs in January, according to the Labor Department. Private nonfarm employers added by 50,000 jobs, while government jobs shrank by 14,000. This is worse than expected: the consensus prediction had been an increase of around 150,000 jobs. Imagine if you expected 150 people to attend your wedding reception and only 36 showed up. You'd be bummed. That's what this employment report is like.

I didn't expect the lousy jobs report to exert upward pressure on mortgage rates. Oddly, mortgage and Treasury bond yields have gone up in the minutes since the report was released. I assume this is because traders are reacting to the unemployment rate, which went down. But the falling unemployment rate is a statistical mirage. That's not a bountiful sea on the employment horizon; just arid air.

I expect mortgage rates to remain stable today, at worst. At best, they might fall a bit, but not much. So I expect this small rise in bond yields to shift into reverse soon.

About that statistical mirage: The unemployment rate depends upon the overall U.S. population, the share of the unincarcerated population that's of working age, and the number of people who either have jobs or want jobs. At the end of 2010, the population numbers were re-estimated by the Census. From my cursory reading of the report, it appears that fewer immigrants are living here: some went home, and fewer people moved here than previously estimated. The labor force shrank, and the unemployment rate fell with it.

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February 09, 2011 at 10:12 pm

Holden, can you do a piece on the Dodd-Frank Loan Officer compensation issue??? This is just not right, I know of no other industry in America that is told how much money you can make...!!! If someone beleives that my fees are too high they can simply go down the street to another bank and get a better deal. How can the government tell us how much we can make on a loan? I'm sure the ones putting this law together have no idea how much more time it takes to do a USDA or FHA loan compared to a conforming loan but yet we have to charge the same for each loan that we originate.. Again this is just not right. Let me know your thoughts.