Last week, we cited the judgment from Bloomberg.com that “the labor market is not as scary as reported in March.” This week, things have improved further. We can perhaps say that the labor market is even looking up a bit.
Why are employment prospects improving? There are several reasons, probably the most important of which are the latest batch of claims for unemployment insurance. The number of people needing assistance because of unemployment edged down to 323,000 in the week ending May 5, with the 4-week moving average falling to its lowest level since the recovery began—a fairly solid confirmation of recent improvements in the jobs market. As Bloomberg.com says, “A comparison with the month-ago trend, showing a roughly 20,000 decrease, points to very solid improvement underway.”
Because fewer applications for unemployment insurance tend to result from fewer people losing their jobs, these figures may inspire some optimism in us. We are reasonably likely to see an improved jobs report for the month of May.
The improvement to the jobs picture will probably show up in applications for mortgages as well. If the number of available jobs is steadying, the demand for loans is likely to rise. And we see that happening in the Mortgage Applications Index, where new purchase money loan applications rose by 2% from the prior week’s 1.4% decline.
Further, refinancing applications may rise as homeowners seek to nail down low rates before they rise further. This is not an easy process to analyze, though, since rates have continued to bounce rather broadly without obvious reason. Are rates poised to rise still higher on increased optimism about the overall economy or are weaknesses in the national and world economy likely to push rates a bit lower? It’s difficult, if not impossible, to say—which is one of the reasons the credit markets are reacting so strongly to any minor changes in the directions interest rates are taking.
What matters the most to us now, perhaps—at the close of a fairly good week of economic data—is that interest rates, employment, and commodity prices seem to be moving together in positive directions—keeping rates low but motivating more buyers and sellers to enter the real estate market. Note that this coming week’s economic indicators could provide some worthwhile insights into the market’s direction. We’ll look for those insights next time.