Last report I mentioned that the only hope for lower interest rates is a weaking labor market. On Friday we got the results we were looking for. It wasn’t a bad number by any means, there were 175,000 jobs created which was much lower than the expected 240,000. The unemployment rate ticked up to 3.9% from 3.8%. This is exactly the kind of report the Fed was looking for. That seems strange to say right? Why does the Fed want a weaker job market?

It all comes back to inflation. Low unemployment means employers must pay more to hire and retain workers. Higher wages lead to more spending which leads to higher inflation. It also is an indicator of what is happening in the economy. Higher unemployment is a sign that maybe the economy is showing weakness. As a side note there are a lot of experts that have issues with how the labor numbers are reported. For instance, a part time job and a full time are counted equally. So if you get laid off from your high paid job in the tech sector and go work at Wal-mart it’s all the same to the jobs report! Most of the job gains have been these part time jobs. You would think that would be an important thing to highlight when these reports come out right? Just remember that the next time someone says that numbers don’t lie.

So where does that leave us? As of now I think it helps put a ceiling on mortgage rates for now. That is until April’s inflation data comes out on the 15^th. However this does give the market something else to think about. If we get another jobs report next month that is below expectations then things could get really interesting. I think the Fed is looking for any excuse to cut interest rates. If unemployment can go past 4%, maybe around 4.2%, then maybe we will see the three cuts this year that was predicted.

Recap:

• Lower than expected jobs report help rates improve
• If next months jobs report is also lower than expected rates could see even bigger improvement
• Next inflation report comes out 5/15