The New Jobs Report and Real Estate
The highly anticipated Jobs Report arrived last Friday morning, showing 85,000 jobs lost during December…and while this was a bit worse than expected, the report also carried some good news, in that the prior month’s revisions showed that November actually had a final tabulation of job gains for the month, for the first time since December 2007.
Additionally, the Unemployment Rate remained stable at 10%. While this all seems to indicate some level of improvement in the labor market – you do have to look beneath the surface to clearly understand the present realities for the labor market.
The Labor Department does use a household survey to calculate the Unemployment Rate – and remember, it stayed stable at 10% – but the calculation is determined by how many people are presently in the workforce. And the household survey indicated that last month, 661,000 people left the workforce.
Whoa – what does “leaving the workforce” mean? And where exactly are they going? Let’s take a closer look to understand.
The Labor Department’s definition of this is a “discouraged worker”, who has not looked for a job during the past four weeks. Based on this definition, there are a few contributing factors that would help us understand why this would indicate such a large number of people “exiting the workforce.” And remember, more people exiting the workforce means less people counted as unemployed, and this number alone last month would have contributed to almost a half percent increase in the rate of unemployment from 10% to almost 10.5%.
So let’s talk about these contributing factors. First, frigid temperatures and piles of snow during December played a role in keeping job seekers home. Add to that the holiday season, as well as travel for family gatherings and vacations during this time, also contributing to pushing off the job search. And perhaps most importantly playing a role are the extended unemployment benefits – up to 99 weeks worth – which could also play into the decision to not seek work. Put this all together, and it might clarify the large so-called exodus from the workforce, which masks the true Unemployment Rate.
Overall – the job picture is still weak, at best.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.
Where does that leave us as we start 2010? Uncertainty creates volatility, but rates are still near record low levels. Banks are getting more comfortable with lending money and clients appear to be dipping their toes into the water again.
Pre-Approval activity has increased, which is a good sign for the purchase market. Low rates are still attractive for the last minute refinance clients who don’t want to miss the band wagon.
So, still a mixed bag of reports creates slow movement in real esate. People who have cash are finding great deals, people on the fence are staying there and people who have to sell due to job losses or financial challenges are putting their homes on the market.
