What Friday’s Retail Sales Figures Could Mean For Your Mortgage Rate
Weak employment data pushed mortgage rates lower last week, creating opportunities for home buyers and home sellers.
Against expectations of 110,000 new jobs created in August, last Friday’s Non-Farm Payrolls report showed a loss of 4,000 jobs.
The story made headlines all over the country this weekend. Here’s why it matters:
- An employed person earns an income
- An employed person spends their income on goods and services
When more people are employed, more dollars are circulated inside the U.S. economy. It’s widely believed that two-thirds of the economy is the result of consumer spending, in fact.
So, because the economy showed job losses, market participants are predicting that the economy will start to slow this fall as consumers spend fewer dollars. They are also predicting that the Fed will lower the Fed Funds Rate to help create a “soft landing” for the economy.
Both scenarios should pressure mortgage rates lower. This is because runaway growth creates inflation and inflation devalues the dollar-denominated mortgage bonds. If the bonds have less value, there will be fewer buyers. Slowing growth, on the other hand, increases demand for mortgage bonds.
As demand for mortgage bonds increases, the rates that go along with them decrease.
This week, we’ll get to see if consumer spending habits are changing yet. Friday, the Department of Commerce will release August’s Retail Sales report. It’s expected to show a 0.3% increase over July.
