“Work, work, work, it’s a labor of love.” The words to Sammy Kershaw’s country song may sound sweeter than the latest employment numbers that were released last week. Read on for details.
The Jobs Report for August didn’t show much love for workers as the Labor Force Participation Rate, which measures the number of people who are either employed or are actively looking for work, fell to its lowest level in 35 years. Job creations were also lower than expected, with 169,000 jobs created in August versus 177,000 expected. Many of these jobs were in the retail and leisure sectors. Compounding this number, job creations for June and July were revised lower, shaving 74,000 jobs from the previous reports.
The unemployment rate did drop to 7.3 percent–the lowest level since December 2008. However, this number was likely lowered by people leaving the labor force rather than organic job growth. It’s also important to note that outplacement firm Challenger, Gray & Christmas said that planned layoffs surged by nearly 40 percent from July to August, reaching the highest level in six months.
In housing news, research firm CoreLogic reported that home prices rose 12.4 percent on a year-over-year basis in the month ended in July. This marks the seventeenth consecutive month of year-over-year price gains. However, home prices remain 17.6 percent below their peak levels, which were set in April 2006.
What does this mean for home loan rates? Weak economic reports can often cause investors to move money out of Stocks and into safer investments like Bonds, including Mortgage Bonds to which home loan rates are tied. We saw some of that dynamic late last week, as Bonds improved after the weak Jobs Report.
The Fed has said that economic data will be a key factor in when it begins tapering the $85 billion in Bond purchases it has been making each month to stimulate the economy and housing market. These purchases have helped home loan rates remain attractive. With economic conditions still wobbly and the housing recovery fragile, the Fed will be watching upcoming economic reports closely.