In what was a surprise to market observers, the economy added 243,000 jobs in January, the most in nine months. The unemployment rate had an impressive showing of its own, falling to 8.3 percent.
Estimates for the January report varied. While a group of economists surveyed by MarketWatch predicted 121,000 new hires last month, HSH.com expected 180,000.
For a mortgage blog, the subject of jobs has come up quite a lot here recently. The reason being, as noted here quite often, jobs play an essential role in maintaining the housing market’s health, vibrancy and sustainability. Steady jobs produce consumer confidence; it’s as simple as that. Consumers who have a steady paycheck are far more likely to buy and refinance. Also, if you’re employed, you are better suited to handle costs increases in everything from your monthly payment to an unexpected home repair.
The minutes from the Federal Open Market Committee’s (FOMC) latest meeting were released last week, confirming the important connection between jobs and housing: Read the rest of this entry »
Each post that we wrote this week highlights a different problem that is holding back this country’s housing market: low rates aren’t enough, today’s mortgage market is mostly made up of the haves and the have nots, lowering home prices won’t create a more stable market and yesterday’s post discussed how the American dream of homeownership doesn’t have to turn into a nightmare. Each one of those posts identified something different that’s going wrong with housing.
But what good is identifying a problem if you can’t think of a way to fix it?
When asked whether Washington would consider instituting another homebuyer tax credit, HUD secretary Shaun Donovan responded saying, “I think it’s too early to say after one month of numbers whether the tax credit will be revived or not. All I can tell you is that we are watching very carefully.” Donovan’s comments have created a whirlwind of speculation that the government will once again step in and distort an already-unbalanced housing market.
Striking a balance
The summer months always tend be slow(er), at least as housing is concerned. After the spring home-buying season, real estate activity slows, people take vacations, go away for long weekends. Instead of worrying about house hunting, borrowers are more concerned with barbeques, content to push their buying decisions down the line a few months.
“Summer is generally a lazier time of the year for borrowers,” said HSH VP Keith Gumbinger.
Confidence is hard to come by these days. Friday’s jobs report certainly didn’t add to anyone’s confidence about a steadily-improving economic picture. Following the release of May’s employment report, stocks fell and hopeful aspirations were eroded. According to latest issue of HSH.com’s Market Trends Newsletter, an improving employment picture isn’t likely to influence higher mortgage rates in the immediate future:
The latest employment reports signal that while we’re on the right path, it’s still looking somewhat rocky. Given the number of job losses in the downturn — part of what the Fed considers “resource slack” — we may not see mortgage rate increases generated solely from labor market improvements any time soon.
Last week CNBC’s Jerry Bowyer asked “why isn’t America hiring?”
…given the political mood in Washington during the past two years which has been far more focused on job creation (or savings) than on general economic growth. The stimuli plans were supposed to be job plans. The auto/bank bailouts cum nationalizations were supposed to be about saving jobs, not ‘Wall Street’. So given two record breaking stimuli within two years, why isn’t America hiring?
Bowyer answers his own question by speculating that “America isn’t hiring precisely because of government policy.” He concludes by writing “Jobs aren’t languishing despite the government’s best efforts. They’re languishing because of them.”
A recent study conducted by students of the Harvard Business School concludes that as much as 42% of U.S. jobs are currently offshorable — that is, able to be done by workers outside of the U.S.
The study was designed to expand upon a study by Princeton economist (and former Vice Chairman of the Federal Reserve) Alan Binder; the study appeared in the Wall Street Journal last year. The Harvard redo, designed to double-check Binder’s findings, was conducted by 900 students from the MBA class of 2009.
Their results indicated that between 21% and 42% of U.S. jobs are potentially offshorable — correlating with Binder’s minimal estimate of 22%, yet surpassing his maximum estimate of 29%:
HSH’s latest issue of its Market Trends Newsletter, “Mortgage Markets, Election Aftermath,” discusses the election’s influence on the movement of last week’s mortgage rates. As the Fed pondered loans for the auto industry, factory orders and manufacturing activity declined, yet despite job cuts worker productivity increased:
In the weeks leading up to the election, mortgage rates bounced higher and lower by unusually large amounts on a week to week basis. This week was a little different, in that the size of the up and down stroke diminished somewhat. Swings in rates have been up 40 basis points, down 37, up 34 again and down again this week. Perhaps we are trending back toward a more stable period.
From The Dismal Scientist: Thursday’s productivity numbers came in better than expected. Nonfarm productivity grew 1.1% (SAAR) in the third quarter, despite the contraction in GDP. Unit labor cost growth was stronger than expected, up 3.6%. Despite the strong growth in unit labor costs, inflation pressures from the labor market are not a concern.
Although the report declined 2.5% from the second quarter, U.S. Productivity has had to maintain its positive efficiency by continuing to cut jobs and employee hours to supplement the lack of demand.
HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.
