Apr 032018

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By G. Steven Bray

It’s another jobs report week, and this one comes at an interesting time for mortgage rates. Bonds rallied at the end of Mar pushing rates down to their lowest levels in over a month, but the gains felt almost too good to be true.

Two factors seem to be supporting higher rates right now. First, we have a fairly robust economy. Job growth continues and, in fact, was quite strong last month. GDP growth looks like it will hit 3% this year. While housing data has been underwhelming, it likely is due to external factors, namely limited numbers of existing homes for sale and various impediments to building new homes.

The second factor concerns inflation. We’ve discussed this many times, and we also have discussed that so far most inflation reports continue to show an absence of significant inflation. But investors keep looking and looking.

And that brings us to the jobs report. Expectations are for continued strong job growth, so that shouldn’t stir interest rates much. However, I suspect investors will be keenly interested in another part of the report: wage growth. Remember that Jan’s report of higher wages caused rates to leap. Some of the air left that balloon last month when wages fell back again. So, which will it be this month?

I’d say the odds don’t favor floating your rate through the week. A higher wage growth reading is likely to cause more damage than you could gain from a lower reading.

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