This morning's stronger-than-expected July Personal Income and Spending report is just the latest in a series of various reports suggesting the economy has not yet fallen into the black hole of a recession. The Commerce Department said spending rose 0.8% last month - it fastest pace in the past five months. Income grew 0.3% on a month-over-month basis and the core rate of inflation as measured by the personal consumption expenditure component of the index posted a modest 0.2% increase.
This morning's data is actually little more than background noise as mortgage investors brace for Friday morning's much more important August nonfarm payroll figures.



Normally the most scrutinized report of the month, the August jobs report takes on added importance given Fed Chairman Bernanke's recent public comments stressing how crucial it is for the long-term health of the economy that the national jobless rate fall below 9.0% (as of the July report the national jobless rate stands at 9.1%). Many analysts believe Friday's nonfarm payroll figures will play a major role in determining what, if any, new economic stimulus plans are forthcoming from the central bank.



An August jobless rate of 9.1% or higher will tend to support the prospects for steady to fractionally lower mortgage interest rates while a jobless rate of 9.0% or lower will almost certainly cause investors to nudge mortgage rates higher. It is a close call - but for the time being many suggest you remain in your fox holes with your helmets on and your head down until/unless the Fannie Mae 4.0% 30-year mortgage-backed security can muster strong enough upward momentum to close above a price of 103.875. It will not take much in the way of an inflation spike or signs of an accelerating economic recovery to prompt an ugly change in your investors' rate sheets



FYI: The mortgage market will operate on a normal schedule on Friday, September 2nd and will be closed on Monday, September 5th for the Labor Day Holiday.