Jobs

Home Affordability Threatened By Friday’s Jobs Report

This week, once more, we find mortgage rates are on a downward trajectory. Conforming mortgage rates have returned to near all-time lows. After Friday morning’s Non-Farm Payrolls report, however, those low rates may come to an end.

It’s a risky time for Indiana and Illinois home buyers and would-be refinancers to be without a locked rate.

Each month, on the first Friday, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for the month prior. More commonly called the “jobs report”, Non-Farm Payrolls provides a sector-by-sector employment breakdown, and the nation’s Unemployment Rate.

In December 2011, the government reported 200,000 net new jobs created, and an Unemployment Rate of 8.5%.

For January 2012, economists project 135,000 net new jobs with no change in the Unemployment Rate and, depending on how accurate those predictions are proved, FHA and conforming mortgage rates for homes in Northwest Indiana and Chicago Illinois are subject to change. The monthly jobs reports tends to have an out-sized influence on the direction of daily mortgage rates.

The connection between jobs and mortgage rates is fairly direct.

Job growth is a key cog in the economic growth engine and mortgage rates change daily based on short- and long-term economic expectation. As more people join the workforce, economic expectations change; the economy tends to expand, breeding optimism among investment. When this occurs, it often spurs investment in the stock market, which tends to leads mortgage rates up.

In short, in a recovering economy, when job growth is strong, all things equal, mortgage rates rise. Home affordability suffers.

So, for today’s rate shoppers, Friday’s job report represents a risk. The economy has added jobs over 15 straight months, a streak that’s added 2.1 million people to the workforce. Although the jobs market remains weak and well off its peaks from last decade, a 15-month streak is worth watching. More jobs means more income earned nationwide, more money spent by households, and more taxes collected by governments.

This items build a foundation for economic growth and Wall Street is watching.

If tomorrow’s Non-Farm Payrolls shows more jobs created than the estimated 135,000, mortgage rates are expected to rise. If the jobs figures falls short, mortgage rates should fall.

The Non-Farm Payrolls report is released at 7:30 AM CT.

High Speed Rail: Valparaiso Indiana Conference May 12

High Speed Rail is in the news again this week as important developments in Washington and around the Northwest Indiana region take place.

Valparaiso University Hosts High Speed Rail Symposium, Thursday, May 12th

The Indiana High Speed Rail Association will hold it’s 12th Annual Golden Spike Seminar, Thursday, May 12 at Valparaiso University. This is a public policy forum, lobbying effort and outreach; and is open to the public. It is an all-day event beginning with 7:30am breakfast, with various speakers and events being held throughout the day, detailing different aspects of this important transportation infrastructure. Click the link for speakers list and to make reservations.

US Department of Transportation Re-Divides Stimulus Funds

As was previously discussed in this column, the US Department of Transportation made good on it’s promise to re-distribute HSR stimulus funds to states to improve their rail infrastructure. High speed rail is a process where railroads need to improve tracks, crossings, and signalling systems from the current 70 MPH capability to the next level of 110MPH.  Higher speed thresholds will be developed later as we improve our standards to ones approaching those of European and Asian systems.  Prototypes are being tested with speeds beyond 300MPH. Since the US is so far behind, it will take great political will to find funds for these projects. And with so many other needs, and austerity on the minds of State and Federal politicians, this “simple” transit upgrade project has become political football.

As we reported, States not willing to provide matching funds to the Obama stimulus money offered, would be cut out of this round of grants. Florida and Wisconsin refused, so the DOT has re-cut the pie, giving more money to Michigan. Now Wisconsin is having second thoughts about their hard line on the matter, so we will have to wait-and-see how it plays out. The goal of a Minneapolis to Cleveland route, and Chicago to Indy, make our participation an important element of the big picture.

Since this represents a classic progressive vs regressive political debate, Presidential candidate Daniels has to watch his step in this political minefield. Those of the Tea Party, we-can’t-afford-anything philosophy see HSR as a big-government boondoggle which will cost trillions and eventually end in failure. On the other hand, more progressive types see HSR, and rail in general, as a critical and long neglected transit element where the US lags far behind the rest of the world. Proponents say that with greener fuel economy attributes than cars, trucks, and planes, 21st Century rail technology enthusiasts are urging lawmakers to join the movement. Can HSR reduce fuel-guzzling regional air traffic and highway miles? Many other countries have said yes, but Americans seem to be saying “not so fast”

With Governor Daniels still on the fence, Indiana remains in limbo. The Governor has tepidly endorsed HSR publicly, however sources tell me he has not requested the DOT funds either; far from a ringing endorsement. As he tiptoes under the microscope of a national spotlight Daniels seems wanting to have it both ways; enjoying the credit and  glow from building stuff,  but prefers that others foot the bill.

Transportation Key To Northwest Indiana Jobs Say Experts

Two recent news reports focus attention on Northwest Indiana’s transportation sector for future jobs growth in Lake county and Porter county Indiana.

Gary Airport Runway Extension

Earlier this month the Gary Airport board moved forward on some of the complicated land acquisitions they need to lengthen the main runway from 7,000 feet to 9,200 feet.  Re-routing several rail lines and an earthen berm are necessary for the site preparation. The longer runway is needed for larger planes and as a safety buffer in case of marginal weather and bad flight conditions.

For years the possibility of Gary becoming Metro Chicago’s third airport has been seen a key feature of the city’s economic recovery.  But success has been elusive. Experts and pundits alike have weighed in with suggestions, but passenger service with a major carrier has yet to take off. Funding such projects comes to the airport from the Regional Development Authority, who also has responsibility for other transportation projects such as municipal bus services. One Congressman, Rep. Chet Dobis, D-Merrillville, expressed concern that too much RDA money goes to “park projects” and shoreline restoration, while lower profile transit issues take a back seat.

Completion of the lengthened runway will allow the airport to finally become a serious player capable of handling all sizes of commercial jets.

Call To Action On High Speed Rail

While the countries of Europe and Asia are moving at full throttle to build up continental networks of high speed rail, American governors in contrast,  remain paralyzed to climb aboard. As one of the pivotal states in this national issue, the controversial debate came to Chesterton Indiana in late February as US Transportation Secretary Ray LaHood came to deliver the keynote address at a conference sponsored by the Northwest Indiana Forum and Valparaiso Indiana Economic Development leaders.

The “Rail Delivers Jobs” conference in Chesterton, was described by The Times newspaper correspondent, Keith Benman as “an impassioned pitch to become partners with the Obama administration”. Emphasizing how critical is Indiana’s role in this long range endeavor, Secretary LaHood is quoted by the Times explaining to business leaders, “If Indiana gets its act together, you could be a dominant player in this plan in this region of the country”.

For those following this issue, an $8 Billion portion of the economic recovery stimulus money was made available by the federal government for high-speed rail development. But the funds are conditional on states providing matching funds. Some states have agreed to take part in the program, but other states have balked, turning down the grants, and saying their economy’s are too stressed to participate. With Wisconsin and Ohio being among the dropouts, it leaves Indiana, Illinois, and Michigan in an awkward position. The goal of a Minnesota to Ohio regional route has problems without Wisconsin and Ohio participating.

With freight rail traffic in Indiana expected to double by 2035, the transportation corridor through Lake and Porter counties, and the critical importance our region plays nationally cannot be ignored. Governor Daniels, who is regarded by pundits as a GOP presidential contender, is in the spotlight to make the correct decision but his endorsement of rail projects are not clear.

So part of Secretary LaHood’s mission is to keep the heat on Governor Daniels to get on a more committed and progressive track. The freight business is the big dog and the railroads and the economy have their own dictates. Cities who have existing rail facilities and trained work force will have the most to gain: Hammond, Gary, Portage, Griffith, Chesterton, and Burns Harbor come to mind.

Crossroads of the Nation was once a State tourism slogan. More trucks, trains, and airplanes sound inevitable. Share your comments on Indiana’s future in the logistics business and what it means for our local economy and quality of life.

Obama’s Right. Jobs Report Wasn’t As Bad As The Headlines

In June, for the first time since December 2009, the U.S. workforce shrank.

According to the Bureau of Labor Statistics, the economy shed 125,000 jobs last month even as the Unemployment Rate dropped to 9.5 percent. The drop in the Unemployment Rate is being attributed to fewer Americans looking for work.

At first glance, the jobs report looks weak but a deeper look shows something different.

Excluding the 225,000 government Census workers that recently left the workforce, the total number of employed persons actually grew by 83,000 in June. That’s 50,000 more working Americans as compared to May.

And, since the start of the year, the U.S. workforce has grown by 857,000.

Jobs growth is closely tied to economic growth because more working Americans means more disposable income which, in turn, stokes consumer spending. Job growth is better than job loss.

Consumer spending makes up the majority of the U.S. economy so as consumer spending grows, investor mentality tends to shifts toward “return on principal” (i.e. stock markets) from “safety of principal” (i.e. bond markets).

A move like this is often bad for home affordability because falling demand for bonds is tied to higher mortgage rates. In addition, demand for homes is likely to increase with the growing number of Americans earning a paycheck. Thereby helping to push home prices higher.

The June jobs report therefore should be bad for rate shoppers and home buyers in Valparaiso Indiana. Fortunately, the markets aren’t reacting that way. Mortgage rates for now are slightly improved since the jobs report’s release.

Perhaps Wall Street is watching the wrong figures, but don’t let that be your loss. If you’re shopping for a mortgage, a home, or both, now may be your best time while rates are still low and with home prices down. Make a move before traders change their tune and you lose your window of opportunity.

Jobs Report Gives Temporary Boost To Home Affordability

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls data from the month prior. 

The release is more commonly called “the jobs report” — a major factor in mortgage rates and monthly payments.

Especially now.

With the recession officially over and growth returning to the U.S. economy, the recovery’s next frontier is jobs. As job growth increases, home affordability should take a hit.  Here’s why:

1. As the number of working Americans increases, so should total consumer spending
2. As consumer spending increases, so should a return to risk-taking on Wall Street
3. As risk-taking returns to Wall Street, bond markets should start to lose

Mortgage rates, therefore, should rise.

Furthermore, as the jobs market stabilizes and recovers, renters should be more apt to buy their first home, and homeowners should be apt to up-size.  More home buyers in Munster Indiana means more competition for homes and higher home prices typically follow.

Job growth can be trickle-up for housing.

Today, however, the jobs data was not so strong. According to the government, 431,000 jobs were created in May, but of those new jobs, 95.4% represented temporary staffing for the 2010 Census.  The number of private-sector jobs created fell well short of expectations and Wall Street is voting with its dollars right now.  Mortgage bonds are gaining so, therefore, rates are falling.

The May 2010 jobs report may not reflect well on the economy, but home affordability in Indiana and around the country is improving because of it.

April’s Jobs Report Ironically Good for Mortgage Rates

On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls report. 

More commonly called “the jobs report”, Non-Farm Payrolls is a major market mover. The number of working Americans is directly tied to the health of the economy which, in turn, drives the stock and bond markets.

In general, when jobs numbers improve, it’s good for stocks and bad for mortgage bonds. It follows, therefore, that conforming mortgage rates in Chicago Illinois rise because rates always move opposite of mortgage bond prices.

Conversely, when jobs numbers worsen, it tends to be bad for stocks and good for mortgage bonds.  Mortgage rates fall.

Today, markets are behaving a bit differently.

Despite 290,000 jobs created in April 2010 — nearly twice the expected amount — and a 40 percent upward revision of March’s numbers, mortgage rates are essentially unchanged. 

In a normal environment, rates would be higher.  Today is not normal.

Today is a departure because, for all of the jobs report’s import to Wall Street, it’s less important to markets than what’s happening in Greece right now.

Greece is struggling to meet its debt obligations and its citizens are rioting.

Until a debt solution for Greece is made that sticks, unrest in the region will drive safe haven buying both domestically and abroad. U.S. mortgage bonds will gain on that movement because mortgage bonds are “safe”, and mortgage rates will fall.

Indeed, this is exactly what’s been happening since the start of April. Mortgage markets have been rallying for 5 weeks.

So, today’s jobs news is terrific for the economy and mortgage rates should be rising because of it.  But, they’re not. Consider taking advantage — lock in your home loan rate.