Working for a Living

“THE BEST WAY TO APPRECIATE YOUR JOB IS TO IMAGINE YOURSELF WITHOUT ONE.” Oscar Wilde And unfortunately, last Friday’s Jobs Report indicated that many more Americans than expected are not just imagining themselves without a job, they truly are without a job.

The Unemployment Rate jumped up to 5.0% from 4.7%, and new job growth in December was reported at a paltry 18,000 jobs…with private-sector job growth actually falling by 13,000, the largest private sector drop in more than four years. And here’s an interesting note - Hourly Earnings actually moved higher than expected. While this seems somewhat contradictory to a slowing jobs number, perhaps it means that employers are attempting to save money by paying more dollars to fewer workers, rather than hiring more staff.

Many experts feel that even the lower than expected number of jobs created is an overstatement, due to averaging that is used by the Labor department, and that this number will eventually be revised lower. Job growth is a leading indicator of economic health, and the latest read points to a strong possibility of a recession in 2008.

Overall, the Jobs Report was much weaker than anticipated - and remembering that negative economic news is generally bad for the Stock market, but good for the Bond market - Bonds enjoyed some nice gains, sending home loan rates about .25% lower throughout the week.

RIGHT UNDER YOUR NOSE, YOU MIGHT BE HELPING LARGE FINANCIAL INSTITUTIONS COVER THEIR LOSSES FROM THE PRESENT FINANCIAL MARKET TURMOIL…FIND OUT HOW TO PROTECT YOURSELF, IN THIS WEEK’S MORTGAGE MARKET VIEW!

Forecast for the Week:

The economic event calendar slows down significantly this week, with only one meaningful report scheduled to arrive on Thursday - Initial Jobless Claims, giving a look at the most recent reports of filings for unemployment. Considering the recent stats on higher unemployment levels, this report will be given special attention.

And notice how prices have recently separated far from their 25-day Moving Average, shown as a green line. Many securities tend to gravitate back towards their 25-day MA once they stray too far above or below it. This is called the “Leash Effect”. Imagine a puppy on a leash straying too far…its owner will tug on the leash to bring the puppy back. Mortgage Bonds have historically shown a similar reaction; once prices stray far from their 25-day MA, they tend to snap back towards it. Notice how this happened about a month ago in the chart below. It is likely that Bonds will again be reined in by the “Leash Effect” in the week ahead, which suggests a bit higher rates.

The colorful chart below shows how Bond prices have run up higher in recent days, and in turn, home loan rates have improved. In fact, they’ve improved so much, that they are somewhat ripe for a reversal. In the absence of any unexpected news - don’t be surprised to see home loan rates worsen a bit in the coming week.

Read the Market View and the week’s Economic Indicator Calendar