The ADP Employment services report showed private employers added a measly 38,000 jobs last month, falling from a downwardly revised 177,000 in April and falling well short of most analysts’ projections calling for a gain of 175,000. ADP has undershot the government’s count of private employment for the past three months by an average of 60,000 jobs. Yet, even with this margin of error, the ADP report suggests private employment gains barely topped 100,000 between April and May. The majority of analysts have now revised their projections for Friday’s May Nonfarm Payroll to something in the neighborhood of 120,000 or so from their previous calls for headline job growth of 185,000. If the government data on Friday falls within the ballpark of these revised projections it is unlikely mortgage investors will respond with yet higher prices and lower rates than those set today.
Adding fuel to the fire of this morning’s rally in the mortgage market was news from the Institute of Supply Management indicating that activity in the manufacturing sector tumbled in May much more dramatically than economists and been expecting. The ISM said its index of national factory activity fell to 53.5 in May from the prior month’s level of 60.4. The majority of analysts had been anticipating the index would post a May reading of 57.7.
Everyone is busy readjusting their views to weaker-than-expected data and restructuring strategies to accommodate the likelihood the economy is rolling over to the downside. There is little doubt Fed monetary policy will remain mortgage market friendly for the foreseeable future.
Even in the face of remarkably low mortgage interest rates, the housing market continues to struggle. The Mortgage Bankers of America said this morning that its seasonally adjusted index of mortgage application activity, a value with includes both refinancing and home purchase demand, fell 4.0% in the week ended May 27th. The purchase indexed inched down 0.2% while the refinance index fell by 5.7%.
The contract rate for 30-year fixed-rate mortgages finished the week ending May 27th at 4.58%, down 11 basis points from a week ago, down 18 basis points from four weeks ago, and also down by 26 basis points from a year ago. Six out of very 10 loan applications taken last week represented a refinance loan request.
Still to come this week is tomorrow’s Institute of Supply Management Service Index at 10:00 a.m. ET and Friday’s much anticipated May Nonfarm Payroll report to be released at 8:30 a.m. ET.
THE MARKET IS ALWAYS RIGHT! … YOU AND I ARE SOME OF THE TIME
