US economy is recovering

Loan Officer Mick Rothblott reports it may not feel like it but the US economy is recovering. We know this from the numbers and numbers don’t lie (or do they?). The non-farm payroll numbers for January was another in a series of better (still not great) economic indicators.

Non-Farm payrolls rose 243,000 in January with another 183,000 in revisions from last year adding a total of 2.1 million new jobs created in 2011. Add it all up, and there are now 163 million people in the United States on payrolls, the highest number since February of 2009.

Among other good news, the jobless rate dropped to 8.3% from 8.5% in December, the best showing since February, 2009. The unemployment rate has now declined for five straight months, partly because of unemployed workers giving up the hunt for a job but also because people are finding work.

A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part-time but who want more work, slipped to 15.1 percent in January from 15.2 percent in December.

So what does all this mean for interest rates?

The report contrasted with a fairly glum assessment of the economy offered by the Fed last week. Officials at the U.S. central bank have been debating whether to buy more bonds – a program dubbed QE3 – to drive interest rates lower. After a policy meeting last week, they said they would likely hold overnight interest rates near zero at least through late 2014.

“This is the kind of data that will challenge the Fed’s wisdom of putting a late 2014 date on prospective tightening,” said Alan Ruskin, head of G10 currency strategy at Deutsche Bank in New York. “The data plays strongly against QE3, although the Fed will surely keep it in the wings.”

Interest rates are low and will continue to remain low for the foreseeable future. How low and for how long is anyone’s guess, but if the numbers continue to show improvement, expect that markets will surely force interest rates up despite what the Fed’s intentions are. Do you agree with Nick's opinion?

mick@mickdoesloan com

www.mickdoesloans.com

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