‘Good’ jobs report leads to higher interest rates

by Tom Tousignant

in Blog

Non-Farm Payrolls November 2009The November jobs report released on Dec 3rd led to the continued increase in mortgage interest rates.  From Dec 1st to the 3rd, rates already jumped  0.25% to 0.375%  from the all-time lows.

The government’s November Non-Farm Payrolls allowed most pundits to claim that the recession is nearly over, if not over already.  I still have a hard time believing this when over 7.2 million jobs have been lost so far in this recession, and we haven’t had a net increase in jobs for over two years.

However, many analysts correctly point out that employment figures are a lagging indicator for the economy. This is because business owners tend to make hiring decisions based on how business has been — not on how it will be at some point in the future.

The jobs report rarely reflects the “right now”. As an example, job loss peaked in January 2009 — 4 months after the height of the financial crisis.

The jobs report also comes out on the first Friday of each month – so how accurate can the statistic be when the BLS only has 3 days to prepare the numbers?

We saw the same pattern during the Recession of 2001.

According to government data, during the last recession, job loss peaked in October 2001 but the recession ended the very next month. It wasn’t until October 2002 that employment went net positive on a monthly basis.

So, investors are cheering November’s jobs report. Better-than-expected numbers and a falling Unemployment Rate could show that the economy is improving.  But, is it different this time?

Unfortunately for rate shoppers, better-than-expected data did push mortgage rates higher.

Is this jobs report a sure sign that the recession is over and rates are permanently heading higher?

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