The Jobs Report and Fed Meeting: The Weekly Market Update

Jobs, Stocks and More

Jobs, Stocks and More

The data is in. The jobs report has been released and the Federal Reserve Board’s Open Market Committee is meeting as we release this publication. Keep in mind that the employment numbers are a major factor in affecting the Fed’s decision — but they are not the only factor. The stock market rally, which indicates confidence, as well as inflationary indicators, are also watched closely. As a matter of fact, the numbers on wage growth might be almost as important as the jobs numbers themselves. Last month, wage growth came in 2.8% on an annual basis and this is seen as good news for workers but bad news on the inflation front.

Add a strong stock market and rising wage growth to the fact that the economy added 235,000 jobs last month and the unemployment rate ticked down to 4.7%, and you can see why the markets are predicting a rate increase. You might ask why a rising stock market would affect the Fed’s thinking. We have already spoken about the stock market’s indirect influence upon the economy. Certainly, the growth of equity will make those who own stocks more confident in making large purchases, and this has the potential to boast the economy.

However, there is a more direct link between the Fed and the rise in the stock market. The last thing the Fed wants to do is raise rates and stifle the economy. With the stock market so strong right now, the Fed is much more likely to conclude that the economy can withstand the news of higher rates. If consumers are uncertain, piling on a rate increase just makes things worse. If consumers are hopeful, they are much less likely to envision higher rates as a roadblock to success. Of course, this is all speculation, and by the time you read this commentary, you are likely to know what the Fed was really thinking.

The Weekly Market Update

Rates moved to their highest level of 2017 last week, as the jobs report approached. For the week ending March 9, Freddie Mac announced that 30-year fixed rates rose to 4.21% from 4.10% the week before. The average for 15-year loans increased to 3.42%, and the average for five-year adjustables moved up to 3.23%. A year ago, 30-year fixed rates averaged 3.68%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield rose about 10 basis points this week. For the first time in weeks, the rate on 30-year fixed home loans moved with Treasury yields and jumped 11 basis points to 4.21 percent. The strength of Friday's employment report and the outcome of next week's FOMC meeting are likely to set the direction of next week's survey rate."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.