Bond pricing improved throughout the holiday shortened trading week.  The market was set for the high impact Jobs Report to be released last Friday. But on Thursday afternoon, economists reduced their official estimate for Friday's Jobs Report number from 115,000 to 100,000, clearly indicating much lowered expectations in new job growth. This was largely based on ADP, the nation's largest payroll processor, coming out earlier in the week saying that their numbers indicated net job losses for the previous month.  Additionally, the Fed Meeting Minutes showed the Fed believes that US job growth is cooling.  When Bond traders saw the late change in analysts formal expectations, they gobbled up even more Bonds ahead of the Jobs Report figuring that the job growth number would likely come in low and cause Bond prices to rally and home loan rates to improve.

When the actual Jobs Report numbers were release, Traders were stunned to see an unexpectedly high December Jobs number of 167,000 with the Unemployment Rate holding steady at a very low 4.5%.  Additionally, the Average Hourly Earnings in December shot 8 cents higher or 0.5%, far ahead of the 0.3% expected rise. This brought the average US hourly pay rate to just over $17.  And a deeper look at the hourly earnings figure showed year over year wages increased by 4.2%, the highest in four years!

Traders quickly realized they were positioned on the wrong side of the market and began to sell, sparking a move lower in Bond pricing, and giving back some of the gains made previously in the week.  At the end of the week, Bonds still ended up on the plus side with home loan rates improving by about .125% across the board.

This Week’s Economic Forecast:

In terms of economic news, the week ahead will be fairly slow until Friday's potentially high impact Retail Sales Report.  Whenever the market lacks economic reports and data to trade on, technical indicators like historic highs, lows and trendlines will generally take be what economist talk about.  Bottom line: in the absence of any surprises during the week, Bond pricing and home loan rates should stabilize and perhaps improve slightly, due to the positive technical picture currently in place.