Mortgage rates moved higher at the end of last week following a mixed employment report and the Dow Jones Industrial Average closing above 12,000 for the first time since June 2008. Manufacturing unexpectedly accelerated in January at the fastest pace in almost seven years. The ISM Factory Index rose to the highest level since May 2004, the 18th straight month the sector has grown. Manufacturers also added 136,000 jobs in 2010, the first annual net gain since 1997. Construction Spending in December fell 2.5%, the biggest drop since July and 6.4% lower than one year ago. The strongest holiday season since 2006 was followed by another strong month when the International Council of Shopping Centers index of stores showed a 4.8% increase in sales among 32 retailers in January. The council noted that consumer spending has been improving for more than one year, very important considering this accounts for about 70% of total US economic activity. The more volatile interest rate movement started on Thursday with the first of several employment reports that were viewed as conflicting and very confusing. ADP Private Payroll Services reported very strong private-sector employment with an increase of 187,000 jobs in January. Initial Jobless Claims were also lower by 42,000. On Friday, Non-Farm Payrolls were only reported to be up 36,000, much lower than the 140,000 expected. In spite of this, the Unemployment Rate dropped from 9.4% to 9.0%. Some believe the rate plunge was largely based on the unemployed giving up on their job searches. It is important to note that the unemployment rate reflects both smaller companies and larger companies, while the payrolls data captures only larger companies. Regardless, the unemployment rate has fallen from 9.8% to 9.0% in the past two months. Currently, the 30 Year Fixed is 4.750% (4.911% APR) and the 15 Year Fixed is 3.875% (4.120% APR). After all the smoke cleared from the employment reports, the 10-year Treasury note yield was up again, reaching 3.65%, its highest level since May 2010. This week is a very light news week. Look for continued reaction to last week’s employment reports to drive the interest rate market early in the week.