Job Reports – Thanks to Von Bumero at Bank of America for sharing this information about the latest the economy and and Jobs Reports shared earlier this week.
Table Source: Vantage Production, LLC
January’s Jobs Report can best be described as lackluster, as employers added just 113,000 new workers. This was well below expectations of 175,000 new jobs. In addition, the number of job creations for December was raised just a paltry 1,000, bringing December’s total to 75,000. November was revised higher to 274,000.
The unemployment rate did fall to 6.6 percent, from 6.7 percent. However, this is not necessarily a good metric of labor market health, as the more important labor force participation rate (LFPR) remains at 63 percent, a 35-year low. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery.
Also of note, productivity in the fourth quarter of 2013 rose by 3.2 percent, with both the third and fourth quarters the highest since the second half of 2009. Employers are squeezing more out of current workers and may not be on the hunt for new employees given the economic landscape, which is another negative for the labor market.
What does this mean for home loan rates? Mortgage bonds and home loan rates have seen some improvement of late, due to some weak economic reports, while stocks have suffered as a result. But a big question remains as we move ahead in 2014: if economic reports continue to be weak, will the Fed continue to taper its bond purchases? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in mortgage bonds (the type of bonds on which home loan rates are based) to help stimulate the economy and housing market. This figure is down from the $85 billion in bonds and Treasuries the Fed had been purchasing last year. The timing of further tapering is sure to impact stocks, bonds and home loan rates throughout the year, and it is a key story to monitor.