“BOTH OPTIMISTS AND PESSIMISTS CONTRIBUTE TO OUR SOCIETY.
THE OPTIMIST INVENTS THE AIRPLANE, AND THE PESSIMIST – THE P
ARACHUTE.” G.B. Stern. And last week’s Jobs Report had something for both
optimists and pessimists, as the numbers
were both good and bad…depending on which survey you looked at, and what
numbers you focused on.
First, the headline numbers: The Labor Department reported that there were
20,000 jobs lost in January, which was worse than expectations of 15,000 jobs
gained. However, the Unemployment Rate came in lower at 9.7%, down from
last month’s read of 10.0%. But what do these numbers actually tell us?
Remember that the numbers in the Jobs Report come from two separate surveys:
First, the Business Survey – also called the Establishment Survey or Current
Employment Statistics Survey – which surveys about 140,000 businesses and
government agencies. It uses something called the “birth/death ratio” to provide
an estimate of the number of jobs gained or lost each month. This survey is used
to report the headline number of jobs gained or lost. Now there is also the Household
Survey, also known as the Current Population Survey, which uses actual phone
calls to 50 – 60,000 households to gather its data. This survey is used to report
the headline Unemployment Rate.
The Business Survey is very susceptible to inaccuracy, particularly during
times when the labor market is substantially worsening or improving…and
you don’t need to look much further than all the revisions to prior reports to see
how inaccurate the report seems to be. December’s report was revised to 150,000
jobs lost, nearly doubling the original report of 85,000 job losses. Although
November showed 60,000 additional gains – wait a minute – October’s revisions
showed another 100,000 jobs lost. And if that weren’t enough, the Business
Survey threw in a “Benchmark Revision”, which indicated that there were an
additional 900,000 jobs lost from March 2008 – March 2009 from what was
previously reported!
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Chart: Non-farm Payroll Change and Revisions
So what about the other report, the Household Survey? It gives us the headline Unemployment Rate, which was reported at 9.7%. That’s an improvement over last month’s reading of 10.0%. But this survey has its own job creation or loss number, just like the Business Survey does. The Household Survey showed that 540,000 jobs were created during January, which is really good news, and explains why the Unemployment Rate declined in the face of the Business Survey showing job losses.
There are definitely some glimmers of hope for the job market – but any way you look at it, the bottom line is that continued and significant improvements need to be seen in the labor market before the economy can be considered out of the woods.
Another important note for the week – Pending Home Sales for December were up significantly from November’s reading, and up a healthy 10.9% over December 2008, as homebuyers take advantage of today’s low rates and tax incentives. And speaking of low home loan rates, the Federal Reserve purchased $12 billion in Mortgage Backed Securities last week, bringing the total to $1.173 trillion since the program began in January of 2009…which leaves just $77 billion in purchases to be made over the next eight weeks until the program ends on March 31st. While home loan rates improved very slightly during this volatile week – don’t forget that when the Fed is done buying, home loan rates will be very susceptible to moving higher. Please reach out to me to discuss how you or someone you know might benefit from current low rates, or the Homebuyers Tax Credit. The clock is ticking on both these fronts – so why wait?
THE NEW MILEAGE RATES ARE HERE! THE NEW MILEAGE RATES ARE HERE! OKAY…NEWS FROM THE IRS ISN’T NECESSARILY ALL THAT EXCITING, BUT YOU DON’T WANT TO MISS OUT ON A SINGLE TAX DEDUCTION YOU MIGHT HAVE COMING. CHECK OUT THIS WEEK’S MORTGAGE MARKET GUIDE VIEW FOR THE DETAILS.
