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Last Week in Review: The Jobs Report for March was released on Friday, but was it “Good” news?
Forecast for the Week: Two important inflation reports are ahead. Plus earnings season begins.
View: Whether you’re traveling for business or pleasure, you never want to overpay for your hotel. Check out the article below for an important money-saving tip.
Last Week in Review
Take this job and love it. And that’s something that fewer than expected people are doing, according to last Friday’s disappointing Jobs report. Here are the details…and what they mean for home loan rates.
Last week’s Jobs Report for March showed that 120,000 jobs were created, with 121,000 private gains offsetting modest government jobs losses. This was an utter disappointment, as expectations were for something north of 200,000 job creations.
The unemployment rate declined to 8.2%. While any decline in unemployment is good news, the figure does need to be taken with a grain of salt – especially in light of the significant headline jobs creation miss. The reason why: the Labor Force Participation Rate (LFPR), which removes some of the guesstimating and adjustments of the unemployment rate. That number (currently at a 30-year low) is a concern because if the LFPR continues to decline, it means we are seeing a smaller ratio of people working against the overall population. This will be another headwind to our already debt-laden government.
While the Jobs Report was disappointing news for our economic recovery, Bonds (which thrive on weak economic news) improved on the news, including Mortgage Bonds, to which home loan rates are tied. And of course, the ugly headline jobs creation reading also renewed the talk of another round of Bond buying (Quantitative Easing or QE3)…even though the minutes from the March 13th Fed Meeting suggested there would be no QE3 unless the economy falters.
In addition, Bonds and home loan rates benefited from the continuing debt rumblings in Europe. Not only has manufacturing there fallen for seven straight months, but Portuguese banks will unlikely meet recapitalization goals for 2012. Spain also has huge banking problems and will be in a recession this year and likely next year; plus Italy, Greece and Ireland are troubled as well. The debt in Europe is only becoming larger – and countries are contracting, while trying to cut spending. Bonds and home loan rates could continue to benefit if investors move their money into what is seen as the safe haven of our Bond Market.
Many factors will continue to impact the direction in which Bonds and home loan rates move in the coming weeks and months. The bottom line is that now continues to be a great time to purchase or refinance a home, as home loan rates still remain near historic lows. Let me know if I can answer any questions at all for you or your clients.
The markets will be open the entire week, despite the Easter and Passover holidays…and two reports stand out:
- The economic calendar is light this week, but investors will be closely watching the Producer Price Index on Thursday and the Consumer Price Index on Friday. Higher oil prices have fanned the flames for higher inflation in the short term says Fed Chairman Ben Bernanke…but in the longer term, it remains subdued.
- Initial Weekly Jobless Claims will be released on Thursday. Jobless claims fell to their lowest level in four years last week to 357,000.
- On Friday the first reading of April Consumer Sentiment will be released.
In addition to those reports, corporate earnings will be in the news this week. Earnings reports are closely watched by investors around the globe. If the tone is positive, there could be a shift back into the Stock markets from the Bond markets, which in turn could push home loan rates higher. On the flip side, if earnings come in below expectations, Stocks could fall while Bonds could rise, in turn pushing home loan rates lower.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.
When you see these Bond prices moving higher, it means home loan rates are improving – and when they are moving lower, home loan rates are getting worse.
To go one step further – a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, Bonds and home loan rates benefited from the disappointing Jobs Report. I’ll be watching the news closely to see which way they move next.
Chart: Fannie Mae 3.5% Mortgage Bond (Friday Apr 06, 2012)
An Easy Way to Get a Refund if Your Hotel Price Drops
When you reserve a room through Tingo, you get money back if the price drops.
By Cameron Huddleston, Kiplinger.com
What if you found out that the hotel room you booked was $50 cheaper when you checked in? How about $100 less — or maybe even $500?
Hotels lower their rates more often than you might suspect, and a new Web site is helping travelers cash in on those price drops. Launched in March by Smarter Travel Media (a TripAdvisor company), Tingo automatically re-books your room at the lower rate if the hotel drops its price. Then you’ll get a refund for the difference.
Americans could have saved nearly $314 million in 2011 if they had taken advantage of these price drops, according to data collected by Tingo. The average price drop is $35, but it can be much more. For example, the price on a two-night stay at the Wynn Las Vegas booked January 27 had dropped $519 by February 23.
To take advantage of Tingo’s price-drop refunds, you have to book at a hotel designated as “Money Back.” But that doesn’t mean you’re limited to just a few hotels. Tingo’s worldwide hotel inventory is powered by Expedia, and more than 95% of the hotels offer the opportunity for refunds.
After you book a room, Tingo will track your rate and send you an e-mail if the hotel lowers the price for any component of your stay. You’ll get a new confirmation number, and your refund will appear on your credit card after you check out. Tingo does not charge any fees for rebooking your room.
Reprinted with permission. All Contents ©2012 The Kiplinger Washington Editors. Kiplinger.com.
Economic Calendar for the Week of April 09 – April 13