Phil Grossfield's Blog


Sell Value Not Price – Jobs Report Tomorrow

Why Analyze The Jobs Market?  Each day I provide some analysis on the markets to give you an idea of what’s going on.  Why do I do this?  What value does it provide to you?

Some think I do it to give you an opinion of whether rates are likely to worsen or improve.  I suppose this is true to some extent…I’d like to think my posts offer some welcomed insight to the potential movement in the markets and in doing so give you a heads-up on pricing changes.  But there’s a far more important reason I do market updates…to empower you.

knowledgeI am a firm believer that the more you know the stronger and more valuable you become.  How often does your borrower say, “I don’t care if rates go up or down…the rate I lock is not important to me“?  Hmmmm, I bet not often.  My best friend’s father was/is a bit eccentric and he used to insist on buying a new car at the highest list price…he was afraid that if he paid anything less the car wouldn’t come exactly like he expected.  Uh, that’s crazy to me.  I always try to get a decent price for whatever I buy…you should see me get the Girl Scouts to come down in price.

valueMy point is, your borrower wants your opinion on whether to lock or wait for a better rate, right? What are you going to tell them?  Are you going to offer a straight out opinion?  I hope not.  Wouldn’t it be better to discuss what’s going on in the market?  Hell ya!  Offer some insight into what is going on in the market, AND, how the activity is likely to affect rates.  Then ask them their opinion. Ultimately it should be their opinion whether to lock or float and this frees you from being wrong.  Just make sure you make them understand that nobody knows for sure what’s going to happen, and regardless of which direction rates go, you are looking out for their best interests and they need to follow through with their decision.  Let me know if you’d like to discuss…

My Market Update – 02/05/2015

The 30-year Fannie Mae bond is trading down -25bps this morning since yesterday’s close.  Generally a lender’s pricing worsens when the bond is being sold off.  However, because we had a bond rally at the end of the day yesterday after negative economic news out of Europe, pricing is still better than yesterday morning on government programs, virtually the same for Jumbo, and Agency rates worsened just slightly.

jobs2Tomorrow is the Jobs Report which always has the power to significantly influence traders’ behavior.  The Jobs Report tells us how many new jobs were created in January.  If the report indicates more new jobs than we expected, traders would be bully on the economy and invest in stocks rather than bonds – when they do our rates/pricing usually suffer.  On the other hand, if the report indicates less new jobs than we expected, then traders would be skeptical as to the strength of the economy and would rather invest in safer bonds than stocks – when they do this our rates/pricing benefit.


The Jobs Report is expected to reveal 230,000 new jobs created in January and the Unemployment Rate is expected t be unchanged.  So, the question is…will the actual report show more or less new jobs in January?  According to MBS Highway, expectations should be spot on, but they are conservatively advising locking.  If the report comes in as expected, then it’s reasonable to assume trading would be neutral with not much movement one way or the other.  However, some feel the Jobs Report may disappoint and reveal far less new jobs than expected.  If this analysis makes the most sense to you then you should advise your borrowers to float their locks to see if improvements are forthcoming.  One more thing to consider…January often makes adjustments for the holiday season since so many employers over-hire for the holidays.  This adjustment has to be taken into consideration when analyzing the jobs market.  My gut tells me we could see an improvement in pricing tomorrow, but rely on your own research and your own gut when making decisions.  Let me know if you would like to discuss…

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