Friday, March 5, 2010

The big news of the day is that winter storms evidently dampened payrolls much less than expected in February. According to the Labor Department the economy lost 36,000 more jobs than were created last month - with most of the losses concentrated in construction. Weather undoubtedly played a role here. January payrolls were revised down slightly to show a loss of 26,000 -- versus the 20,000 jobs lost as originally reported.



The big debate ranging between analysts right now revolves around the dynamic of weather distortions in today's headline nonfarm payroll numbers. One camp is arguing that the "blizzard-effect" caused job losses to be underestimated -- while the other group is flapping their arms and insisting that if it had not been for the impact of the "blizzard-effect" the economy would have experienced positive job growth in February.



According to research done by Bloomberg columnist Timothy Horman, the most recent storm of similar intensity occurring during a nonfarm payroll survey week was in January 1996. The data for payrolls that month showed a lost of 19,000 jobs -- followed by a gain of 434,000 in February. At this juncture it doesn't matter a twit whether next month's headline nonfarm payroll shows a substantial gain in job creation or not - the mere idea that historical data suggest such an outcome is possible will likely be enough to limit the ability of mortgage interest rates to move notably lower between now and Friday, April 2nd when the March payroll figures are released.



Looking ahead to next week Uncle Sam will be active in the credit markets from Tuesday through Thursday as he looks to borrow $85 billion in the form of 3- and 10-year notes and 30-year bonds. The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was flat last month while sales excluding autos are expected to post a very modest gain of 0.2%. If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.2% or more and the ex. auto component shows a gain 0.4% or more -- look for mortgage investors to push interest rates fractionally higher.