More Evidence of a Softening Economy

From the beginning of my mortgage career to about the end of 2003, the most important day of the month was the first Friday of the month. That was the day that the employment numbers came out. For that time period, no number drove interest rates more than the previous months employment. Now, keep in mind that low interest rates require that the economy be doing poorly, and you will see the obscene perspective that most mortgage brokers view the world. In other words, we root for everyone else's doom. The worse the employment figure looks the better that is for us. On some levels, mortgage brokers were dancing in the streets all day yesterday. The employment numbers weren't just weak, but for the first time since July 2003, they were negative.

The latest employment numbers followed a trend of either a softening economy or impending disaster depending on your perspective. Anyone that believes the economy is about to blow up found nothing but an assertion of their belief in the last numbers. This was the fifth month in a row that the economy not saw jobs weaken but was lower than the cumulative prediction. That said, in the aftermath of 9/11, we lost one million jobs in three months. By August 2003, we were gaining jobs again and that only stopped this month. The three months in the aftermath of 9/11 were reason to panic. The current situation is a bit more inconclusive. First the economy has been growing four over four years straight. (Yes, that is despite the manner in which the media has portrayed the economy. It is easy to pretend as though the economy is doomed when you ignore things like GDP, unemployment, etc. ) Thus, it may have been due for a breather regardless. That is combined with the housing crisis, which has put extra contractionary pressure on the market.

The question remains just how much pressure there will be and just how badly the economy will soften. To me, that question is still unanswered. I look at the economy based on the numbers that I see not what they may or may not predict. The unemployment rate is still now at 4.9%. Under any circumstances, that is a solid number. The GDP number grew at 2.2% annually last year, but only .6% over the last quarter. That tells me there is an obvious softening but not obvious how much that softening is.

The next round of employment numbers will be quite important not only for my business but as an indicator of what the economy is doing. Stay tuned...