Mortgage rates have been falling since April, shedding more than 1 percentage point since the Refi Boom began. Today, that momentum could lose some steam.

The Bureau of Labor Statistics releases the October jobs report at 8:30 A.M. ET. With a stronger-than-expected reading, mortgage rates should rise, harming home affordability in California and nationwide.

As cited by the Fed earlier this week, jobs are a key part of economic growth and growth affects mortgage rates.

Looking back at jobs, starting in January 2010, after close to 24 consecutive months of job loss, the economy added jobs for the first time since 2007. It started a small jobs winning streak. By May — boosted by the temporary census workers — monthly job growth reached as far north as 431,000 jobs.

That figure then slipped negative in June and has yet to turn-around.

This month, economists expect 61,000 jobs lost and 9.6% Unemployment Rate.

Jobs matter to the U.S. economy. Among other reasons, employed Americans spend more on everyday goods and services, and are less likely to stop payments on a mortgage. These effects spur the economy, stem foreclosures, and promote higher home values.

The reverse is also true. Fewer workers means fewer disposable dollars and, in theory, a slowing economy. Weak jobs data should spur a stock market sell-off which should, in turn, help lead to mortgage rates lower.

Strong jobs data, on the other hand, should cause mortgage rates to rise.

The stronger October’s employment figures, the higher mortgage rates should go.

Mortgage rates have been jumpy this week because of the Federal Reserve and its new support for bond markets. Today’s employment report should add to the volatility.

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls data from the month prior. 

The release is more commonly called “the jobs report” — a major factor in mortgage rates and monthly payments.

Especially now.

With the recession officially over and growth returning to the U.S. economy, the recovery’s next frontier is jobs. As job growth increases, home affordability should take a hit.  Here’s why:

1. As the number of working Americans increases, so should total consumer spending
2. As consumer spending increases, so should a return to risk-taking on Wall Street
3. As risk-taking returns to Wall Street, bond markets should start to lose

Mortgage rates, therefore, should rise.

Furthermore, as the jobs market stabilizes and recovers, renters should be more apt to buy their first home, and homeowners should be apt to up-size.  More home buyers in Orange County means more competition for homes and higher home prices typically follow.

Job growth can be trickle-up for housing.

Today, however, the jobs data was not so strong. According to the government, 431,000 jobs were created in May, but of those new jobs, 95.4% represented temporary staffing for the 2010 Census.  The number of private-sector jobs created fell well short of expectations and Wall Street is voting with its dollars right now.  Mortgage bonds are gaining so, therefore, rates are falling.

The May 2010 jobs report may not reflect well on the economy, but home affordability in California and around the country is improving because of it.