Wages Key For Jobs Report: The Weekly Market Update


Closer or Further Away?

This week we will see the release of the November employment numbers. The key question we will be watching is whether we will be moving closer to a rate increase or further away with respect to the Federal Reserve Board’s meeting next week. According to the minutes of the last meeting, the Fed’s members had a healthy debate about the threat of inflation. Inflation “hawks” were worried that the tight labor market carries a risk that rising wages will quickly increase inflationary pressures.

On the other hand, the “doves” feel that the absence of large wage increases could mean that if the Fed raised short-term interest rates, it could cause inflation to stay too far below the Fed’s target of 2.0% for a prolonged period of time. Thus, we will not only be looking at the number of jobs created, but also looking for any sign that wage inflation is starting to take off. Judging by the economic reports we have seen in the past month, market analysts are still counting on a rate increase.

Speaking of higher costs, the Federal Housing Agency raised the limits for conforming mortgage loans for 2018. This affects the size of loans allowed under Fannie Mae and Freddie Mac mortgage programs. The new limits are $453,100 for 1-unit properties, with a maximum of $679,650 in high cost areas. While we have talked about higher housing prices making purchasing less affordable, the higher loan limits are one of the benefits of higher housing prices. Owners of homes gain more equity when prices go up. And these higher conforming limits will allow first time home buyers to purchase more home with a smaller down payment.

The Weekly Market Update

Rates were down slightly for the second straight week, but trended upward as the survey was being released. For the week ending November 30, Freddie Mac announced that 30-year fixed rates fell to 3.90% from 3.92% the week before. The average for 15-year loans decreased to 3.30%. The average for five-year adjustables increased to 3.32%. A year ago, 30-year fixed rates averaged 4.08%, higher than today.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "Rates on 30-year fixed loans fell two basis points to 3.9 percent in this week's survey, but we closed our survey prior to a surge in long-term interest rates following an upward revision to third quarter economic growth and comments by Federal Reserve Chair Yellen touting a broad-based economic expansion."

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.