The ADP Employment – often but not always ignored by all financial markets – was far lower than the previous month’s 152k. ADP reported this month’s private sector job growth at 57k. That MAY mean this Friday’s lower expectations for Payroll growth may not be low enough. The record of predictability for the ADP is mediocre. (See yesterday’s post for an explanation of the ADP Employment report.)

This morning’s MBA Purchase Application Index was reported at 405.3. This kept the 4-week moving average steady at 396.93. Last week the Mortgage Bankers Association reported the Application Index at 401.3 with the 4-week moving average at 396.78.

Crude Oil Inventories are out and seem to have little impact on crude prices at this time. We will update this later if it seems to be impacting rates.

Beige Book and Consumer Credit will be published later today. See yesterday’s post for commentary on these two.

TOMORROW, 08 MARCH 2007.

There is only one major item on Thursday; the weekly Initial Jobless Claims. It is expected that the Labor Depart will disclose 322,000 to 335,000 workers will file for unemployment insurance. These predictions are lower than last week’s 338,000.

The Bank of England and the European Central Bank will make their policy announcements overnight. They are not expected to surprise the market, but that does not always mean anything.

The Monster Job Layoff and the Chain Store reports are two minor items that are often, but not always ignored by the bond market.

[Publisher’s note: With the exception of Saturday & Wednesday, we will publish only one of the outlook sections each day on a rotating basis, none on Friday. SHORT-TERM OUTLOOK (on Monday) attempts to forecast and discuss up to the next 30 days. MID-TERM OUTLOOK (on Tuesday) looks forward from 15 to 90 days, most often 30 to 90 days. The Mid-term has the most accurate predictions, just like the weather. The LONG-TERM OUTLOOK (on Thursday) will extend out the next six months, maybe one year. When we change an outlook section we will embolden the date and heading.]

SHORT-TERM OUTLOOK [5 March 2007]

Rates have been good the last few weeks, at least in part due to a flight to safety. One very important thing to consider, flights to safety are almost always temporary. Once things settle down, and the equity markets stabilize, the cash will flow back out of bonds and rates will go back up. We recommend locking today.

Most of this week's economic items are of moderate importance until Friday. Friday’s data includes the all important Employment Situation Report (Payroll Growth, Unemployment, Average Hourly Workweek, and Hourly Earnings). Tuesday will also be a bit volatile with the Productivity report.

LONG-TERM OUTLOOK [31 January 2007]

In the long-term, we may see some easing in the FED funds rates in late 2007.

Most economists tend to agree with Richard F. Moody of Mission Residential as do we. “We (Mission Residential) continue to hold to our view that no changes in the Fed funds rate are on tap for the first half of 2007 before what we expect to be below-trend GDP growth will open the door for two rate cuts over 2007's second half, but are increasingly open to the possibility that the FOMC could remain on hold for the remainder of 2007.”

The good news is still in the employment and production fronts. Both will conspire against each other to keep inflation low.

Steve Boxmeyer [612] 799 – 6858
steveb@LendWithIntegrity.com