Improving Job Gains
Better than expected labor market data was unfavorable for mortgage rates over the past week. Increased concerns about the situation in Ukraine had a greater impact, however, and the flight to safer assets more than offset the jobs data. Mortgage rates ended the week lower, at the best levels of the year.

The headline number for April job gains showed the largest monthly increase since January 2012. Against a consensus forecast of 215K, the economy added 288K jobs in April. Average job gains over the last three months were an impressive 238K, up from 167K over the prior three months. In addition, the Unemployment Rate dropped from 6.7% to 6.3%, the lowest level since September 2008.

The results of the Employment report likely would have been worse for mortgage rates except that some of the details were less encouraging. According to the survey used to determine the Unemployment Rate, an enormous 806K people left the labor force in April, which was responsible for most of the decline in the Unemployment Rate. The Participation Rate, essentially the number of people able to work who are currently in the labor force, fell to 62.8% from 63.2%, near the lowest levels since 1978. Average Hourly Earnings, a proxy for wage growth, showed no gains. In short, job gains in April reflected a strong rebound from weather-related winter weakness, but investors are hoping to see further improvement before they alter their long-term outlook.

Looking ahead, events outside the U.S. could have a major influence on U.S. mortgage rates. The next European Central Bank (ECB) meeting on May 8 could have an impact as they consider a new bond purchase program. Global bond yields have fallen in anticipation of this possible program. As has been seen recently, changes in the situation in Ukraine also could affect mortgage rates at any time. Upcoming U.S. economic data includes Retail Sales and the monthly inflation reports.