In my column last week, I reported that only 18,000 American jobs were created in June, a number well below the 125,000 economists expected. That news, coupled with a worsening economic crisis in Europe, raised the demand for U.S. Treasury bonds, which in turn lowered their yield. Mortgage rates followed.
The latest economic news was mixed and perhaps confusing. The Labor Department recently reported that new applications for unemployment benefits dropped by 22,000, to 405,000 in the week ended July 9. Economists surveyed expected a drop of only 7,000.
I’m no economist, so perhaps that’s why I’m confused about the seemingly conflicting reports. First, we get a terrible report that only 18,000 jobs were created when the expectation was 125,000. A week later, we receive a report that applications for unemployment benefits were lower than expected by two-thirds.
So, far fewer jobs were created, and there were far fewer applications for unemployment benefits than expected - maybe there’s been a big increase in the population of stay-at-home moms and dads.
Meanwhile, the Labor Department reported that the producer price index (PPI) fell 0.4 percent in June, indicating that inflation is under control. If you factor out the volatile food and energy prices, however, the so called “core” rate of the PPI rose a higher-than-expected 0.3 percent. This might indicate inflation is a potential threat.
Long-term interest rates, including mortgage rates, seem to favor the notion that inflation is under control and economic growth remains anemic. The yield on the 10-year Treasury once again has fallen under 3 percent, making mortgage rates even more attractive.
The jury is still out as to whether these super low rates will help the comatose housing market, but for existing and qualified homeowners, the refinance market remains vibrant. Expect fixed-rate and adjustable-rate mortgages with little or no fees in the range of 3.25 percent to 4.75 percent.
My phone is ringing, and I’m very thankful.
• Henry Savage is president of PMC Mortgage in Alexandria. Send email to henrysavage@pmcmortgage.com.
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