Market Analysis

Today's big news was the January Non Farm Payroll report.  The employment report is actually two separate reports which are the results of two separate surveys (see next paragraph for explanation).  The reports provided two different pictures of the labor market.  The household survey showed that the unemployment rate dropped from 10% in December to 9.7% in January.  The establishment survey though showed 20,000 job losses in January and, in the annual revisions to the data covering the period from December 2007 when the Recession began, showed that the economy has lost 1.2 million more jobs than previously estimated for a total of 8.4 million.  The net result of the jobs reports was that the stock market fell for most of the day until recovering very late in the afternoon.  Bonds initially were flat but improved during the day and then weakened in the afternoon when the stock market recovered.  While we clearly welcome the improved market, it is very important to not get complacent.  We barely moved to 4.75% with 0 points during the afternoon which is really not much movement for the amount of selling pressure that occured with equities.   Most experts believe that without a change of course by the Fed in the coming weeks, mortgage rates will jump at least .5% to the mid 5's level and possibly higher.   It is possible that a large stock market correction could help create a flow of money into mortgages just as the Fed is pulling out. However, even though such an event is clearly possible, if you are closing a loan in the next 60 days it is probably safer to find your lender and get locked.

Below is info from Briefing.com which explains the two jobs reports

The household survey is a survey of roughly 60,000 households. This survey produces the unemployment rate.

The establishment survey is a survey of 375,000 businesses. This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few.

Both surveys cover the payroll period which includes the 12th of each month.  The reports both measure employment levels, just from different angles. Due to the vastly different size of the survey samples (the establishment survey not only surveys more businesses, but each business employs many individuals), the measures of employment may differ markedly from month to month. The household survey is used only for the unemployment measure - the market focusses primarily on the more comprehensive establishment survey. Together, these two surveys make up the employment report, the most timely and broad indicator of economic activity released each month.