Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – February 5, 2010

We Managed To Break Above All Lines Of Resistance

Unemployment Drops to 9.7%

YooHoo!  That’s the Headline on the News Channels and Websites.  So, why haven’t rates skyrocketed?  Check this out…The Headline Number for Jobs Creations, for the month of January, was a -20,000 figure.  Yes, that’s a negative twenty thousand.  We were expecting 15,000 jobs gained.  This number was reported to us by the Business Survey.  Quite frankly, it’s generally a very unreliable Survey.  So unreliable that it has three names.  Business Survey, Current Employment Statistics Survey (CES), and The Establishment Survey.

So, Why Is The CES Used?

The CES can be more accurate, when there is less volatility in the market and numerous jobs numbers are either being lost, or gained.  So, it can be a helpful tool.  By interviewing approximately 140,000 business, nationwide, the survey gets its information from these businesses.  It also takes into account the birth/death ratio, when calculating their jobs numbers, and this can be very innacurrate in volatile times, as well.

Revisions To The CES

Here’s how accurate the CES has been (sarcasm).    December’s numbers were revised to 150,000 jobs lost.  Almost double what was originally reported.  November showed 60,000 additional gains, and October showed an additional 100,000 jobs lost.  Then, the big Benchmark Revision I discussed on Wednesday.  As I stated, the revised numbers were an additional 900,000 jobs lost from March of 2008, to March of 2009.

The Household Survey

This month, the media chose The Household Survey, in which to report the labor statistics.  This Survey, formally known as Current Population Survey (CPS), calls about 60,000 actual households.  The household survey showed that the U.S. gained 540,000 new jobs, in January.  The Unemployment Rate is reported by The Household Survey and jobs numbers are reported by both the Business Survey and The Household Survey.  So, the media can take information from either of these Surveys.

The Fed Is Watching

“I always feel that, (The Fed) is WATCHING ME.”  Falco (I think), but more recently made popular by Geico commercials.  If the Fed feels as though the media is portraying a move toward more healthy labor statistics, they may remove their “extended period,” comments from their next FOMC meeting.  That wouldn’t be good for interest rates.

Quick Sidenote

$1.173 Trillion, of the Fed’s designated $1.25 Trillion, has been spent on the Mortgage-Backed Security Government Purchase Program.  We’re gettin’ close folks!  Rates will increase when this occurs!

Locking Advice

Rates are similar to yesterday, but I feel that the market it just digesting the labor statistics.  I’d lock, today.  But, we have managed to stay well above the 50 and 100-Day Moving Average, so floating would be risky, but could be beneficial.  With rates at, or below, the 5.0% area, how can you go wrong?  I also feel as though investors will take this new lower unemployment figure and take their funds from bonds and put them into stocks, as stocks generally do well with better than expected unemployment statistics…

Related Must Reads

The Benchmark Revision Numbers
Fed’s “Extended Period” Comments…What It Means
Why Rates Will Increase Once The $1.25 Trillion Is Spent

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This entry was posted on Friday, February 5th, 2010 at 9:56 am and is filed under Chico Home Loans, Interest Rates, Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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