Read between the lines. That sentiment certainly applies to the Jobs Report for April. Read on for details.
There was good news in the labor sector, as 288,000 jobs were created in April. This was well above the 210,000 expected and the largest month-to-month increase in two years. In addition, the Unemployment Rate fell to 6.3 percent, the lowest level since September 2008.
However, all was not rosy within the report. The Labor Force Participation Rate (LFPR) fell to 62.8 percent, matching a 35-year low. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery. It was also estimated that 806,000 people dropped out of the labor force. All in all, while this report shows the labor sector is improving, there is still a long way to go.
Also worrisome, the first read on Gross Domestic Product (GDP) for the first quarter of 2014 came in at an anemic 0.1 percent. This was below expectations and down from the 2.6 percent recorded in the final quarter of 2013. The 0.1 percent was the weakest performance in three years. This report shows that, while the worst of the recession may be behind us, the recovery is far from over.
The other major news last week came from the Fed, which announced more tapering to its Bond buying program. The Fed will now purchase $25 billion in Treasuries and $20 billion in Mortgage Bonds (the type of Bond to which home loan rates are tied) each month to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing.
What does this mean for home loan rates? Remember that weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. We saw some of this dynamic in the markets last week as Bonds and home loan rates rallied after some of the weak news that was reported. In addition, the Fed is expected to continue tapering its purchases throughout the year—but whether Bonds and home loan rates improve or worsen with further tapering remains to be seen. These are key stories to monitor as we head into the warmer months.
The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients.