The Jobs Report – How Good (or bad?) Was It?

Saturday, August 8, 2009

By admin

Technorati Tags: employment report,jobs,unemployment rate,tom vanderwell

You know, I’ve had more than one person accuse me of being way too negative in today’s market. I prefer to think of it as way too educated or something like that. No matter how you call it, I feel like it’s way too important to not only my business but the financial futures of too many people for me to just take the numbers at face value.

So, with that being said, let’s dive into Friday’s Jobs Report for July and take a look at what the report says and doesn’t say. First, the basics:

The number of jobs lost is reported at 247,000. That’s down substantially from the jobs lost in June and it’s about 75,000 less than the “market” had been expecting.
Unemployment went down from 9.5% to 9.4%. Yes, that’s correct, the unemployment rate dropped.
The manufacturing work week jumped .8% compared to June. More on that later.
Average weekly earnings rose .5% compared to June
The May and June reports added 43,000 jobs (actually reduced the losses by 43,000).

Now some questions that this report brings up:

What’s the margin of error in the market’s expectations? Probably not a 20% miss like this. The market did get thrown a curveball from that standpoint.
Am I the only one who finds it questionable that a quarter of a million (almost) jobs were lost and yet the unemployment rate went down? Well, according to David Rosenberg, the reason for that is because there were a substantial number of people who essentially fell off the ranks of the “employable” and gave up looking for work. So, that drops the number of unemployed workers and voila! The unemployment rate drops.
Remember how, with both the May and June job reports, the losses were “worse than expected” because the auto industry was doing their summer thing (and their bankruptcy thing) earlier than normal. Well, guess what, they are back at work and according to the reports that I’ve read, that added 28,200 jobs to the payroll (many of which had been shut down in May and June). To put that in perspective, if the auto industry added that many on a regular basis, that would increase the amount of auto industry workers by 69%. There’s no way that is a sustainable number in today’s market.
Federal workers – There were a lot of census workers hired this spring. Then the government laid off 57,000 workers in May and June (census?). Well they hired another 12,000 in July.
Average weekly earnings rose – but so did the minimum wage. Is there a connection between the two? It makes one wonder……

Am I trying to paint the jobs report for July as a bad report? No, I am most certainly not. It was substantially better than many of the recent months. I’m grateful for that.

But, like many of the economic reports that we’ve seen recently, it’s not as good as it sounds. Between the auto industry fluctuations and the census bureau fluctuations, we have enough of a “swing” to put the number almost right back to where the “market” expected.

So what difference does this make for the housing and mortgage markets? Here’s the way that I see it:

The mortgage and bond markets got beat up quite badly on Friday after this report came out.
Rates jumped quite a bit Friday morning.
Most likely, the time will come, and probably as early as this coming week, when the markets will see that all is not as good as the headline numbers say in these reports.
And then the stock market will pull back and we’ll see mortgage and bond market rates drift downward again.

Do I expect it to happen on Monday? Probably not. Remember the saying, “Mortgage rates take the elevator on the way up and the stairs on the way down.” Go up fast, drift down slowly.

Stay tuned to both here and http://straighttalkaboutmortgages.com for more thoughts and insights into the markets.

Tom Vanderwell

Tags: Employment Report, Jobs, Unemployment Rate

This entry was posted on Saturday, August 8th, 2009 at 8:01 pm and is filed under Market Musings. You can follow any responses to this entry through the RSS 2.0 feed.

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