Forecast for the Week

The labor market will be front and center this week, with May’s Jobs Report headlining several important releases.

• The closely-watched ISM Index will be released on Monday, bringing key news for the manufacturing sector. Look for the ISM Services Index on Wednesday.
• Wednesday also brings Productivity for the first quarter of 2014, and private payroll numbers from the ADP Employment Report.
• Weekly Initial Jobless Claims will be delivered on Thursday.
• That leads us to Friday, when one of the most closely-watched economic reports will be released—the Jobs Report for May, which features Non-farm Payrolls and the Unemployment Rate.

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. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse.

To go one step further—a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds hit 2014 highs, though news on inflation helped cap some of these gains. Home loan rates are at some of the best levels we’ve seen in months, and I’ll be watching them closely in the weeks ahead.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday May 30, 2014)

The Mortgage Market Guide View…

Budget Stretching Business Behaviors

In today’s economic environment, many small-business owners and independent professionals are paying better attention to their budgets. Here are some easy tips that can help.

First, take inventory. One of the best ways to reign in your budget is to analyze spending habits. For a true picture of spending, keep a log of every expense (for small businesses, ask your accountant for a report, or track with software like QuickBooks).

Second, analyze items. Look for things like unusual office supply expenses, ineffective marketing, unnecessary printing, random entertainment expenses and similar items that could be deemed non-essential.

Third, organize by need. Group your expenses according to Must Haves (rent, insurance, approved supplies and utilities), May Haves (updated furniture, new business attire, training, technology upgrades, flights and hotels), and Non-essentials (items that, while nice, could easily be cut or minimized). This will give you a good top down view so you can cut expenses in the way that makes the most sense for your business.

As always, please feel free to share these tips with your clients and colleagues!

Date	ET	Economic Report	For	Estimate	Actual	Prior	Impact
Mon. June 02	10:00	ISM Index	May	NA		54.9	HIGH
Wed. June 04	08:15	ADP National Employment Report	May	NA		220K	HIGH
Wed. June 04	08:30	Productivity	Q1	NA		-1.7%	Moderate
Wed. June 04	10:00	ISM Services Index	May	NA		55.2	Moderate
Wed. June 04	02:00	Beige Book	Jun	NA		NA	Moderate
Thu. June 05	08:30	Jobless Claims (Initial)	5/31	NA		327K	Moderate
Fri. June 06	08:30	Non-farm Payrolls	May	NA		288K	HIGH
Fri. June 06	08:30	Unemployment Rate	May	6.4%		6.3%	HIGH
Fri. June 06	08:30	Average Work Week	May	34.5		34.5	HIGH
Fri. June 06	08:30	Hourly Earnings	May	NA		0.0%	HIGH

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