November jobs report

December 6, 2013

Click Image to view larger

The U.S. Bureau of Labor Statistics released its November jobs report, showing strong gains in employment. For homeowners who have been enjoying a low-rate mortgage over the last year, the new report may be an indication that higher interest is in store for 2014.

According to the report, 203,000 nonfarm payroll jobs were added to the economy in November. In a surprisingly strong turn, the national unemployment rate dropped from 7.3 percent in October to 7 percent in November. Economists originally expected only 180,000 jobs for November, Forbes reported.

Job gains have exceeded a monthly average of 200,000 from August through November, a substantial increase from the 159,000 average from April through July. In terms of the overall economic health, consumer spending was down slightly, though more jobs could eventually turn that around. With more hiring, there is a greater chance for wage increases and more consumer spending, which drives roughly 70 percent of economic activity, the Associated Press reported.

Federal Reserve fiscal policy
The gains have thrust the Federal Reserve's upcoming December meeting into the limelight, as many economists believe officials will decide to reducestimulus spending. Fed officials are planning to meet Dec. 17 and 18.

Currently, the Federal Reserve is spending $85 billion per month on U.S. Treasury bonds in an effort to keep long-term interest rates low and encourage more borrowing.

Jim Baird, chief economist for Plante Moran Financial Advisors, told Forbes that a second consecutive month of strong employment gains revealed by the November report increases the likelihood that the Federal Reserve will begin to taper quantitative easing soon.

Weaker reports earlier in the year made economists predict the Fed would wait until later in 2014 to taper, when the economy showed signs it would be able to continue improving without stimulus spending. Fed officials have previously stated they would wait to scale back quantitative easing until the unemployment level had reached 6.5 percent or lower. To reach that rate, Fed officials noted employment would need to grow by at least 200,000 jobs per month, which it has averaged since August. In a healthy job market, that level usually hovers between 5 and 6 percent.

Economists now predict that the Fed will wait to begin tapering until January or March 2014, instead of later in the new year, Forbes reported. It is unlikely they will reduce spending in December, as the monthly meeting is just around the corner.

Contact the Federal Savings Bank, a veteran owned bank, to discuss low cost mortgage options.