Economic Update

Heigh Ho, Heigh Ho, It's Off to Work We Go! If ever there was a week to sing that old Disney® song, it was last week when Americans received some good employment news. Despite a worse-than-expected ADP National Employment report - which isn't known for its accuracy - the Initial Jobless Claims report came in on Thursday with some good news. According to the report, Americans filing for unemployment benefits came in at 550,000, versus the 580,000 expected. In addition, the four-week moving average declined for the sixth consecutive week.

The markets received more evidence of an improving job market on Friday. The Labor Department reported 247,000 jobs lost in July versus economists' expectations of 328,000 jobs lost. As you can see in the chart below, this is down pretty sharply from June's lower, revised 443,000 jobs lost and the smallest loss since August 2008. Even better, the Unemployment Rate dropped to 9.4%, from the prior month's reading of 9.5%. This reading broke a streak of 9 straight monthly increases and gave a lot of credibility to the good news in the job market.
-----------------------Chart: US Non-Farm Payroll (jobs losses shown in thousands)










The employment news is good news for the economy because it may signal that the worst recession in our lifetime could be ending. That said, the Obama Administration agreed on Friday that we're seeing the light at the end of the tunnel, but cautioned that the country still has a lot further to go and that the US will not have a true recovery as long as job losses continue.

A stronger job market can also signal improvement in the housing market. We saw indication of that last week as the Pending Home Sales Index came in at 3.6%, which was much better than the 0.7% that was expected. The National Association of Realtors also reported that Pending Home Sales rose in June for the fifth straight month, fueled by low home loan rates and bargain home prices. Overall, the news was a strong indication that the housing market may be looking to improve.

Overall, the economic news helped boost Stocks, as the Dow gained 114 points to close the week at its highest level of the year. The economic news and increase in Stocks last week, however, put pressure on Bonds, which ended the week lower, putting upward pressure on home loan rates


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