Last week, the Jobs Report for September was released, but the numbers may not be as clear as they seem. Read on for details and what they mean for home loan rates.
The Labor Departments Jobs Report showed that 114,000 new jobs were created in September, with 104,000 private sector job gains and 10,000 government job gains. While this number was lower than expectations, the job numbers for July and August were revised much higher.
But perhaps the biggest news in the report is that the unemployment rate came in at 7.8%, falling by a whopping 0.3% from Augusts 8.1% reading. This represents the lowest unemployment rate since January 2009. And while that is good news, its even more important to look at the Labor Force Participation Rate (LFPR).
The LFPR did improve by 0.1% to 63.6%, but it remains near thirty-one year lows! The LFPR calculation is quite simple. If you are 16 years old and not in the military, then you either have a job or not. The ratio of people “participating” or working is then compared to the total population.
On balance, Septembers Jobs Report confirms that our economy is producing 125,000 to 140,000 jobs per month. While that may sound good, those numbers are not high enough to keep up with immigration and popu lation growth. The ongoing weakness in the labor market is one of the major reasons why the Fed announced another round of Bond buying (known as Quantitative Easing or QE3) on September 13, saying they will provide this stimulus to our economy until the labor market is well into recovery.
So what does all of this mean for home loan rates? Another reason the Fed enacted QE3and they are buying such large amounts of Mortgage Bonds each monthis to keep home loan rates (which are tied to Mortgage Bonds) near record lows. The Fed hopes this will help strengthen our housing market and economy overall. However, as the labor market and economy start to improve and if inflation heats up, Bonds could face some selling pressurewhich could impact home loan rates negatively as a result.
