Better than expected jobs data has put the pinch on our Austin mortgage pricing.  Nonfarm Payrolls fell 247K, less than the consensus estimates of -320K.  The Unemployment Rate, which everyone expected to be at least 9.6%, fell to 9.4%.  This was the first month that unemployment fell (9.5% to 9.4%) since April 2008.  May and June figures were also revised higher (less unemployed), adding salt to our mortgage banker wounds.  Still the number of long term unemployed rose to 5.0%, representing about 1/3rd of all unemployed workers.  Education, Health Services, and Leisure/Hospitality Services gained jobs while Manufacturing and Construction lost fewer jobs than expected.  That was the difference between the consensus call and the “print”.  We would call this report “hopeful” with the current trend losing less as the economy recovers.

The rise in hourly earnings is also a tip off that the recovery is growing legs yet the recovery still has a long way to go.  We look for growth in the employment front sometime in early January 2010.  As we talked about yesterday, any number under consensus would not treat us kindly.  So is the case as the 10 year note is off 1 point to yield 3.86%.  Mortgage backs have felt the pain as well, off 24/32’s on the lower rates and 20/32’s on the premium priced coupons.  Stocks love the news, up 150 points on the big board.  From the technical front, 2’s, 5’s, and the 10 year note have pushed yields through their range highs which will keep price action in a bearish trend.

As we mentioned before, given the hand we’ve been dealt, expectations for a 4.0% 10 year note yield (as our next target) have a high probability.  We would expect this trade to develop early next week as the market sets up for 75 billion in new paper coming to auction (Quarterly Refunding).  All is not lost.  The consumer is not exactly on fire as most need a crow bar to remove their wallets and spend.  Housing is also a concern as rising interest rates will dampen buyer enthusiasm and lessen affordability.  Both will act to support our market and keep Austin mortgage rates in the low to middle 5’s.  Keep your guard up and your hopes high.