Forecast for the Week: The job market labors on, but will Friday’s Jobs Report for April be painful?

View: Ever wondered how healthy your neighborhood is? There’s an easy way to find out!

The search for answers begins with last week’s regularly scheduled meeting of the Federal Open Market Committee (FOMC), which was followed on Wednesday by the historic, first-ever Fed Chairman’s Press Conference. Here’s a summary of the main points that Fed Chairman Ben Bernanke shared:

• Bernanke said the downtick expected in Gross Domestic Product (GDP) is “transitory,” and that the economy’s temporary sluggishness is somewhat a result of high Oil prices, which he believes is also temporary in nature.
• Inflation has picked up in recent months but long-term inflation remains subdued.
• Bernanke was also crystal clear in saying the Fed will complete the $600 Billion of Quantitative Easing 2 (QE2) purchases through June, as originally planned.

So what does all of this mean for home loan rates in the short and long term?

An important factor to keep in mind is the US Dollar, which continues to decline. With QE2 and the dollar printing presses going full steam through the end of June – we should expect the “greenback” to erode further, and how the US Dollar performs after QE2 may have a meaningful effect on the Bond market and home loan rates. A persistent weak US Dollar is ultimately not good for Bonds or home loan rates, as a continued decline would make US dollar denominated assets like Treasuries and Mortgage Bonds (to which home loan rates are tied) less attractive. A weak Dollar is also inflationary, as it makes our exports more expensive.

The bottom line is this: In the short term, Bond prices are close to a position to break out higher, which would lower home loan rates further still. However, in order for this to happen, the Bond must break above a tough level of technical resistance. Longer-term, how the economy performs post-QE2 will determine which way Bonds and rates are headed at that point, but it’s most likely they’ll trend higher.

If the economy, which still has stubbornly high unemployment and millions out of work, doesn’t pick up on its own post-QE2, then the Fed will continue its accommodative monetary policy as much as it can to avoid inflation. This is to support the economy and push Stocks higher still…but this would have a further negative effect on the US Dollar, as well as Bonds and home loan rates.

If you have been thinking about purchasing or refinancing a home, call or email me to learn more about why now is a great time to benefit from today’s historically low rates. Or forward this newsletter on to someone you know who may benefit.

• Thursday’s weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Claims sadly climbed to 429,000 for the week, well above both expectations and that psychologically important 400,000 barrier. Unfortunately, the pain in the labor market has not been “transitory”. And seeing Claims rise back above 400,000 is not a good thing, as Initial Jobless Claims are a leading indicator on the health of the economy.
• The Labor Department’s official Jobs Report for April on Friday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds and home loan rates have improved due to the slowing in the economy. I’ll be watching closely to see if this trend continues.

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Fortunately, finding that information is quick and convenient when you visit http://www.countyhealthrankings.org.

This website brings together 50 reports through the collaboration of the Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute. The result is a health ranking of each state’s counties.

How Does Your Community Rank?

1. Simply visit http://www.countyhealthrankings.org.
2. Hover your mouse of the map of the U.S. and click on your state.
3. Click on your county once the state map appears on your screen.

It’s that easy. With just a few clicks, you can see your county’s overall ranking as well as important local statistics related to:

• Unemployment
• Education
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• Access to recreational facilities
• Air pollution
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• Diabetes
• And much more!

Check out your county today – and share this information with friends, family members, and co-workers in your community!

Economic Calendar for the Week of May 2-6, 2011

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of May 02 – May 06