Commentary: New claims for unemployment benefits fell last week to their lowest level in 30 months. The Labor Department said this morning that the number of American workers standing in line to file first-time claims for government jobless benefits dropped by 20,000 to a seasonally adjusted 368,000, the lowest since May 2008. Even though last week's jobless claims data falls outside the survey period for tomorrow's much more important February Nonfarm Payroll report mortgage investors were quick to take note of the fact that weekly jobless claims have reached a point where strong job growth will become increasingly evident in coming months. Against such a mindset it will likely be difficult, if not impossible for mortgage interest rates to sustain a move to notably lower levels.
In a separate report, the Institute of Supply Management said its Service Sector activity index (a measure that encompasses roughly 90% of all activity in our domestic economy) strengthened in February, touching the 59.7 mark, its highest level since August, 2005. With the employment component of the ISM's Service Sector Index firmly in the mid 50's (55.6 to be exact) there is good reason to believe that labor demand in this province of the general economy will soon begin to rise noticeably.
The big surge in job creation in the manufacturing sector last month (as reflected in Tuesday's ISM Manufacturing Index) -- together with today's solid job performance report contained in the ISM'S Service Sector Index -- has caused many traders to ramp-up their projections for tomorrow's nonfarm payroll figure. Analysts, economists and other market participants are currently calling for a net gain of roughly 200,000 new jobs in February - very noticeably eclipsing the 170,000 new job projections that existed as the week began.
In my judgment, mortgage investors have already priced in a headline nonfarm payroll number of 200,000 with a 9.0% unemployment rate. If my assessment proves accurate, it will likely take a February nonfarm payroll number greater than 210,000 and/or a national jobless rate less than 9.0% to put significant additional upward pressure on mortgage interest rates. While such an event is certainly possible - my personal opinion is that it is not very probable - at least not this time around.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
