A flicker of hope for savings account rates
August 13, 2012
It may be an isolated piece of good news, but last week's Bureau of Labor Statistics (BLS) July report on job growth stood out for just that reason. After several weeks of almost nothing but bad news for the economy, this employment report bucked the trend by showing improvement.
Still, this flicker of hope shouldn't overly influence consumer strategies for managing bank rates. Some hard-eyed realism needs to govern behavior until a trend of positive economic developments can be sustained.
Turning the tide for jobs?
Job growth has been trending downward since the beginning of this year. Most recently, it was 87,000 new jobs in May, and 64,000 in June. For this reason, July's payroll increase of 163,000 new jobs was unexpectedly strong.
So far, job growth has averaged 151,000 per month in 2012, after averaging 153,000 in 2011. Against this backdrop, July's employment increase of 163,000 was above average. Perhaps more importantly, it defied the downward trend that has prevailed so far in 2012.
To temper those positive observations with a dose of reality, the fact is that month-to-month employment numbers tend to be pretty erratic. It doesn't pay to invest too much in any one month's reading, good or bad. Plus, 163,000 new jobs is hardly indicative of robust growth. It is only above average compared to the anemic standard of the last couple years, and it wasn't enough to stop July's unemployment rate from edging up to 8.3 percent, from 8.2 percent in June. Job growth of 200,000 or more would be a more convincing reason for optimism, and the main thing is to sustain that kind of growth, not simply flirt with it for a month or two.
Make no mistake, July's job growth report was good news, if only because it did not continue the increasingly bad news on employment from the months that preceded it. Ultimately, though, July will only prove significant if it represents the month that job growth turned the tide, and began a sustained move back upward.
Raising your own rates
If it will take a few months before job growth indicates that the economy is on the mend, it will take even longer before bank executives are convinced enough to start raising savings account rates. So don't get caught in the waiting game -- you need more active strategies for managing bank rates than simply waiting for them to start heading back up. Here are two suggestions:
- Look to go long. It will take months before job growth can establish itself as a sustainable trend, and even longer before bank rates start to rise meaningfully. In exchange for a higher rate, it might be worth shifting some money from savings to a three-year CD -- or even a five-year CD if you can find one with a mild early-withdrawal penalty.
- Unlink your checking and savings accounts. Checking account fees can easily exceed the interest on savings accounts these days. You need to get both free checking and a competitive savings account rate, and if you have to use different banks to obtain these, then do so.
July's jobs report may prove to be good news for the economy. But if you want good news on bank rates anytime soon, you'll have to make it happen yourself.