Friday, December 4 2009

It is almost too good to be true.



Employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began in December 2007. According to government figures, the economy shed only 11,000 jobs last month - far fewer than the 130,000 drop in the November headline nonfarm payroll figure most economists had anticipated. The national jobless rate dropped to 10% from October's 10.2%.


The data geeks that compile these figures also announced that they had overstated the job losses in September and October by 159,000. Not only did payroll losses drop sharply, but leading indicators of employment also improved significantly. In particular, temporary help agencies added 52,000 jobs last month following a gain of 40,000 in October. Businesses tend to ramp up their temp numbers before adding permanent headcount to their payrolls.



On its face the story from the labor sector is that the worst of the recession appears to be behind us. The recent flow of macro-economic data continues to paint a developing picture of the economy in transition from a deep recession to a modest recovery. That's terrific news for the millions of American's who yearn to return to the labor force -- and overall I think it is good news for single-family mortgage originations.


Even though improving statistics from the labor sector will likely encourage the Fed to be more vocal about an exit strategy from their sharply mortgage market friendly monetary policy strategies - the inevitable rise in mortgage interest rates will probably be largely muted by a return of consumer confidence which subsequently will likely lead to improved demand for homeownership.


Which is worst - an economy in which a loaf of bread costs $1.00 and a man/woman happens to have a $1.00 to spend on bread - or an economy is which a loaf of bread cost 25 cents and a man/woman has no money at all to spend on bread or anything else?



Looking ahead to next week Uncle Sam returns to the credit market looking to borrow $70 billion or so in the form of 3-year notes on Tuesday, 10-year notes on Wednesday and concluding with a 30-year bond offering on Thursday. The only major economic report on tap is Friday's 8:30 a.m. ET release of the November Retail Sales figures.