Maybe It's Not a Fluke

Maybe It's Not a Fluke

Two weeks ago we published a column entitled "Words of Optimism." Last week a surprisingly strong employment report was released. Was this a coincidence or was it an accurate prognostication? We do know that the jobs data can be tricky. What looks strong one month can be reversed the next month as the new month's data is always accompanied by revisions of previous numbers. Thus, we would need to see two or three months of strong jobs reports before we declare a turnaround and a great prediction (or a lucky guess). On the other hand, the words of optimism were based in fact and those facts included the important numbers regarding increased household formulation. As a matter of fact, household formulation and jobs data are clearly linked.

As more jobs are created, more households are created as children move out on their own. This demand for housing -- both rental and purchase -- creates more jobs. This relationship created a vicious cycle during the recession. Today it could influence the start of a virtuous cycle in which the economy is buoyed by both factors working together. Again, our thoughts are not just the result of rampant speculation. A recent report by the Federal Reserve Board indicated that the employment rate was set to fall in the coming months -- "Across the board, these indicators show the pace of the labor market recovery has increased compared with a year ago," wrote Mary Daly, the San Francisco Fed's deputy research director, and colleagues Bart Hobijn and Benjamin Bradshaw. "We take this as evidence that the recovery in the labor market is robust, broad-based, and likely to continue, if not accelerate, over the coming months." (Reuters). So, perhaps the surprising jobs report was not a fluke. But we still need to see a few more months of data to really determine if this is the case.

Mike Ervin
Mortgage Loan Officer
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mike@mikeervin.com