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This week has two distinctive drivers that may move mortgage rates. The first is data—lots of new data about the strength or weakness of the US economy. The second is drama—of the presidential election variety. By the end of the week with the release of the final (and most important) economic report of the week, the data and drama will likely overlap.
The week begins today with the important ISM Index. The ISM Index is a monthly report on the relative activity in the US manufacturing sector. While showing some signs of life earlier in the year, US manufacturing could best be described as stagnant. A reading above 50 indicates growth in manufacturing, while a reading below 50 suggests contraction. Experts expect today’s reading to fall just below 50 at 49.7%. We’ll see at 10 AM.
Wednesday delivers the first look at the jobs picture for the week with the ADP Employment Change report. While not a good predictor of the actual results from the Non-Farm Payrolls report which comes on Friday, it is nevertheless a comprehensive measure of the US job market. Expectations are for a significant drop in new jobs from last month. Also on Wednesday is the ISM Services Index which is also forecasted to show contraction in this important sector of the US economy.
Wednesday night is where the drama comes in to this equation with the first of the Presidential Debates. With Governor Romney slightly behind in the polls it is likely he will hammer President Obama on the economy and on foreign policy. The sluggishness of the economy and the inability to get the unemployment rate down below 8% will be a key point of contention.
As always, Thursday provides the weekly Jobless Claims report. A slight increase in new applicants for unemployment benefits is expected. Also this Thursday is the monthly Factory Orders report. Analyst are calling for a major drop in factory orders. Finally Thursday is the release of the minutes from the last Federal Reserve Open Market Committee meeting in which they voted to initiate a new round of quantitative easing.
Friday is where data and drama come together. The all-important Non-Farm Payrolls report is released which includes the official unemployment rate for the month. Projections are for a slight increase in new jobs for the past month, yet it may not be sufficient to keep the unemployment rate from rising from 8.1% to 8.2%.
This report is crucial as it will frame the presidential contest up until the final week of the race when next month’s report is due. Watch closely for any “funny business” with the report. Last month the number of new jobs was insufficient to cause the unemployment rate to drop—yet it did anyway do to a change in the number of people considered “in the workforce.” Such a maneuver this month would lead to huge drama.
2012-10-02 09:01:36