Mortgage Rate Update July 2, 2015

Mortgage rates are effectively unchanged from Monday.

Normally during jobs week I am writing the Thursday ‘rate update’ about the expectations for the all-important jobs report and how the release may impact mortgage rates the following day.  That is because the jobs report is normally released on Friday.

However, given that this week is a holiday shortened week the report was released today so we get to examine the results in this update.  The report showed that 223,000 new jobs were created in June.  This was slightly lower than analysts’ expectations.  Furthermore, the previously released results for May and April were revised downward.  Bad news for the jobs market is often good news for mortgage rates.

The unemployment rate ticked down to 5.3% from 5.4%.  Job creation only deserves partial credit as 432,000 Americans left the labor force last month (the unemployment rate measures the number of people not working of those who would like to work).

Lastly, wages were flat month-to-month and only up 2% year-over-year.  The Fed has a close eye on wages.  Although we’ve had strong job creation over the past year we haven’t seen real wages grow for most Americans.  As a result employers have not had to increase their payroll expense which has allowed inflation to remain low.  Low wage growth gives room for the Fed to keep short-term rates low.

The next big event is Greece’s referendum on Sunday.  Greeks will vote to accept further austerity measures in exchange for additional bailout funds or not.  Should the referendum carry it could put further pressure on rates Monday morning.

Current Outlook: locking bias