Market Job Report - Feb 3, 2012

Last week, the Jobs Report showed 243,000 jobs were created in January, which was much better than expected. Upward revisions to November and December added another 60,000 jobs to what was previously reported for those months. And adding to the good news was a 0.2% decline in the Unemployment Rate, bringing it to 8.3%, the lowest since February 2009.

Despite all the positive news, the report did show a decline in the labor participation rate from 64% to 63.7%. Understandably, the demographics of baby boomers retiring does account for some of the decline. And the U-6 Unemployment Rate (which counts all persons marginally attached to the labor force, including those who are employed part-time but would prefer full-time work) remains at 15.1%, dropping just 0.1% for the month.

The Commerce Department reported that personal incomes rose in December by 0.5%, above expectations and well above the 0.1% reported in November. This marked the largest increase in nine months.

So what does all of this mean for the housing market and home loan rates?

While bonds and home loan rates did worsen on the good Jobs Report news (remember good economic news often causes money to flow out of bonds and into stocks, as investors try to take advantage of gains), home loan rates remain near historic low levels. In addition, the problems in Europe remain and while uncertainty exists, U.S. bonds (including mortgage bonds, to which home loan rates are tied) will benefit.

The takeaway from all of last week’s news is that the pace of improvement in the labor market is choppy, but the trend is towards improvement over time, and this is welcome news for the struggling housing market because as people feel more secure in their jobs, they are more willing to consider making major purchases like a home.