Freddie Mac reported the 30 year fixed rate fell to 4.19% from 4.20% the previous week, the 15 year held steady at 3.36%. The 1-Yr ARM dropped by a basis point to 2.42%. Yet once the unemployment and jobs numbers were released for September, which happened on Friday, mortgage rates became volatile as investors reacted to the news.
The headline unemployment rate fell to 5.9% but investors were paying more attention to the actual jobs added in September: a healthy 248,000. The Dow enjoyed the news closing up more than 200 points to close above 17,000.
Mortgage rates rose slightly Friday morning but at the end of the day finished up very near where they were the day before. The unemployment rate may be having less of an impact than you might think as a number investors rely upon to gauge the economy. The fact is fewer and fewer people are actively in the work force. The unemployment rate is calculated dividing the number of people in the workforce into the number of unemployed. Those who quit the workforce entirely aren’t counted as unemployed.
The labor participation rate, the number of those in the workforce compared to the total population fell to its lowest level since February 1978. When consumers drop out of the workforce, it skews the unemployment rate.
The Fed’s quantitative easing program will officially end this month with no plans of any extension. Investors are expecting a gradual rise in rates culminating in a Fed move perhaps as early as the first quarter of 2015 if economic reports continue their relatively strong surge. For 2015, it’s not a matter of “if” the Fed will raise both the Fed Funds and Discount Rates but when. The good news is that these Fed-controlled rates don’t directly affect mortgage rates.