Overall employment and lagging estimates for industry hiring rose in the latest Bureau of Labor Statistics report, but other job indicators were weak, suggesting downward pressure on mortgage rates remains possible.
The U.S. added 227,000 jobs during November, outpacing the Dow Jones consensus estimate of 214,000 as nonbank mortgage broker and banker job indicators for October climbed to a 10 month high of 274,000 from a downwardly revised 272,700.
On the other hand, the unemployment numbers, which are highly correlated with loan performance stress, ticked up on a net basis. The unemployment rate rose in November to 4.2% from 4.1% a month earlier.
"Despite the jobs bounceback, the uptick in the unemployment rate likely boosts the chances of a quarter-point interest rate cut later this month by the Federal Reserve," First American Senior Economist Sam Williamson said in an emailed statement.
Numbers from the Job Openings and Labor Turnover Survey reported earlier this week also have indicated some weakening in the economy, Mike Fratantoni, chief economist of the Mortgage Bankers Association, noted in a statement the MBA released Friday.
"While we are not seeing a pickup in layoffs, new entrants and individuals who lose jobs are having a more difficult time regaining employment," Fratantoni said. "The payroll gains continue to be concentrated in just a few sectors, government, health care, and leisure and hospitality."
Other mixed signals include recent hurricanes that led to a net decline in private sector jobs in October and wage growth has been fairly stable at a 4% annual rate.
In some cases there are signs that while wages are growing, they still aren't keeping pace with housing affordability, according to a recent Bank of America report on Western regions and the technology sector.
"Consumers appear to be easing back on 'trading down," Joe Wadford and David Tinsley, economists at the bank, said in a recent report. "However, our data shows the proportion of westerners living paycheck to paycheck is also rising."
Fratantoni forecasts that the net effect of all this will be that the monetary policy officials keep cutting short-term rates, but more slowly.
While some signs of economic weakness and Fed cuts could exert downward pressure on the long-term mortgage rates that currently dominate the housing finance market, upward momentum on bond yields persisted Friday morning.
"Uncertainty about the potential impacts of the incoming administration's policies have pushed 10-year Treasury yields, and consequently mortgage rates, higher," said Williamson.
He forecasts that mortgage rates will stay in the high-to-mid 6% range until year-end unless more signs of weakness in the economy materialize.
Despite bond market volatility, Freddie Mac's most recent weekly report showed there has been a
There have been reports of weaker loan performance as well.
