Though economy added jobs in January, the unemployment rate went up slightly too. This is because individuals are not counted as unemployed unless they are actively seeking a job. As a result, more job seekers in the market increases the unemployment rate. This also has an impact on mortgage rates too. Please read on for more details.
“Friday’s stronger-than-expected labor market report was great news for the economy. It was negative for mortgage rates, though.
The economy added 257,000 jobs in January, which beat the consensus forecast. More impressive, upward revisions to the results for November and December added another 147,000 jobs. The employment data also reflected a substantial increase in average hourly earnings, an indicator of wage growth. It rose on an annual basis by 2.2%, far above expectations.
The unemployment rate unexpectedly rose from 5.6% to 5.7%, but this was actually a good thing. When the government is determining the unemployment rate, people are not counted as unemployed until they are actively looking for work. In January, a large number of people felt the time was right to begin looking, so they went from not being counted in this data to being counted as unemployed.
More jobs and higher wages are indications of an improving economy, but they also raise concern about future inflation. Since mortgage rates are largely tied to investor expectations for future inflation, the reaction to the strong employment data sent mortgage rates higher.
Looking ahead, another significant labor market report, JOLTS, will come out on Tuesday. JOLTS measures job openings and labor turnover rates. Fed Chair Yellen has stated that she closely follows this report. In addition, there will be Treasury auctions on Tuesday and Wednesday. The ongoing debt negotiations between Greek and Euorzone officials continue to be a focus of investors.” – Courtesy of Ed Brehm, of Prospect Mortgage
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