The week’s most talked-about story hit the wires Friday.

According to the government, the U.S. economy shed 533,000 jobs last month and the national Unemployment Rate rose to 6.7%.  This was the largest number of jobs lost in any one month since the recession of 1974.

In a normal market, job losses of this magnitude would have caused stock markets and mortgage rates to fall.  But stocks and rates didn’t fall Friday.  To the contrary, both rose.  This is because — while the jobs reports was the most talked-about story last week — it wasn’t the most important one.  That story had already been told.

Last Monday — officially — we learned that U.S. economy is in recession.

Although most of Wall Street knew it already, the official determination was an acknowledgement that “bad economic data” is not only acceptable, but normal given the current conditions.

In other words, when the jobs data was released Friday morning, one reason why mortgage rates rose was because markets somewhat shrugged off the data, saying: “Yeah, of course job losses are up – we’re in a recession, after all.”

This is an unfortunate development for rate shoppers because bad data usually anchors mortgage rates lower.  Going forward, that won’t likely be the case — at least until the recession is declared to be over.

This week, without much new data being released, markets should trade largely on news of federal intervention and expectations for the U.S. economy.  As retail sales figures drip in from the weekend, be wary of stronger-than-expected numbers as that could pull mortgage rates higher.  The same goes for Friday’s official Retail Sales data for November.

Either way, expect volatility throughout the week — same as we’ve seen all year long.

(Image courtesy: Wall Street Journal Online)

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Tags: Economy, housing, job losses, recession, unemployment, Wall-Street

In an effort to analyze the current state of the economy, San Francisco Federal Reserve Bank President, Janet Yellen, shared with us her take on things:¹

She said that declining home prices could hurt consumer spending, and that risks to economic growth would be “significant” if housing prices fall in the context of rising unemployment.

“The key point is that … a drop in house prices is likely to restrain consumer spending to some extent,” Yellen said.

I’m glad to know that at least people running things are fully aware of the extent of the damage the economy is facing. The key now, is whether or not they can do anything to repair the damage that has been caused.

All we can do now is wait and see . . .

Sources:
¹ Yahoo Finance - Fed’s Yellen: turmoil adds to risk for economy

Tags: Economy, fed, housing market, Interest Rates, Janet-Yellen, mortgage, mortgage-woes, San-Francisco-Fed, unemployment