HomeLoans Blog

This morning markets were hit with a big, unexpected and significant, drop in the headline news unemployment rate.

It had been runing over 9.7 to 9.8%% for months and was expected to improve slightly, maybe 9.6 to 9.7%%. A slight improvement.

Wow - 9.4% was not at all expected, and should have caused the stock market to jump up and rates to jump even higher.

Funny thing, that is not what happened. Rates held steady and the stock market actually dropped.

The reason is the facts behind the 9.4% unemployment.

Fact 1 - the labor pool is shrinking, meaning the number of people who are either employed or looking is lower.

Fact 2 - long term unemployed is higher, people no longer qualified to receive unemployment

Fact 3 - discouraged workers grew by over 389,000 year over year

Fact 4 - actual non farm payroll growth has declined - 103k last month and 71k prior

Fact 5 - the non farm payroll 2010 average of 94k is almost half the number needed to bring about any real recovery in employment

Fact 6 - housing is still a big problem and the forclosure and pending foreclosure inventory is massive and growing.

The fact is despite the apparent good news of a drop to 9.4% unemployment, the markets were not impressed.

And rightfully so.