How Employment and Unemployment Affects Interest Rates
Posted on | January 12, 2010 | No Comments
The December employment report came in relatively bond friendly. Though unemployment came in at 10% as expected; the payroll component showed job losses of 85,000 compared to the 35,000 losses that were expected by analysts. Though the mortgage bond market had a generally positive reaction to the report, improvements in rates were tempered by concerns for some of the revised data from prior months. Revisions to the November figures showed a 4000-job increase as opposed to the original 11,000-job decrease.
Employment numbers coupled with other fiscal factors impact interest rates, and while most would think that keeping interest rates as low as possible is the goal, ultimately, it is not. When the economy is rocking at a healthy pace, interest rates are around 8%. Currently, the Fed is doing quite a few things to keep rates low to get the housing market moving along because a healthy housing market, most of the time, is also needed to have a healthy economy. We will all have to wait and see if everything that has been done will actually work to restore jobs and a health economy.
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