Thursday, December 2, 2010

And now the waiting begins.



Tomorrow morning's release of the November nonfarm payroll report is almost anti-climatic following yesterday's dramatic sell-off in the mortgage market. The trigger for the pounding mortgage interest rates took yesterday was a stronger-than-expected report from payroll company ADP that showed a 93,000 gain in private payrolls. But that was yesterday.



Today the Labor Department reported initial claims for government unemployment benefits rose a stronger-than-expected 26,000 to a seasonally adjusted 436,000 during the week ended November 26th. This morning's data will have no bearing on tomorrow's much more important nonfarm payroll report because it fell outside of the survey period for the monthly number. It does appear that this morning's weekly initial claims data has caused investors to reconsider some of the "wild-eyed" whisper-numbers that created such a panic in the market yesterday. A reading of 436,000 suggests the labor market is firmer than it was a few months ago but not yet at the point where the unemployment rate will start falling on a consistent basis. Typically, a noticeable decline in the number of unemployed workers will occur when the seasonally adjusted claims readings are below 400,000.



Most analysts are now anticipating Friday's November nonfarm payroll headline will likely show the economy created 145,000 more jobs than it lost last month while the jobless rate remained at 9.6% for the third consecutive month. If the headline number matches or falls below the consensus estimate, and prior months' revisions don't climb dramatically higher, this report will likely prove to be supportive of the prospects for steady to fractionally lower mortgage interest rates. It will probably take a November headline payroll number greater than 150,000 and a national jobless rate of 9.5% or less to drive mortgage interest rates notably higher from current levels.