Jobs numbers for January came out a bit rosier than expected. Although the unemployment rate notched up some to 5.7%, the number of new jobs created surpassed the 230,000 expected to 257,000 new non-farm payroll employees. The increase in rate from 5.6% to 5.7% can be attributed to more people entering or re-entering the workforce. That’s evident from the labor participation rate released by the Labor Department. According to the report, the number of eligible workers either looking for work or on the job rose slightly to 62.9%.
Perhaps the most encouraging number concerned wages. Average hourly earnings rose 0.5% after a fall in December, to a 2.2% annualized rate. According to economists, that’s enough of an increase to spur buying. If consumer spending can get back on track, we just might see a recovery that means something. So far, we’ve just been trudging through it seems.
What does that mean for interest rates? While the number of new jobs created wasn’t near 300,000 it was the 12th straight month of job gains of more than 200,000. For today and into next week, it’s quite possible the interest rates for the 30 year VA loan could approach 3.75% mark and the 15 year closer to 3.00%. If stocks continue their gains over the next few weeks, it could indicate a gradual rise in rates.
If that is the scenario, the only thing holding back rate increases comes from foreign lands, not ours. With Japan, China, Russia, Greece and the European countries all scrambling for some way to get their economic engines running, more money will continue to flow into the safety of U.S. Treasuries and mortgage backed securities. And so far, it looks as if the United States is the only major country that seems to be on solid footing.