Savings account rates weighed down by persistent unemployment
August 09, 2010
| MoneyRates.com Senior Financial Analyst, CFA
Friday's employment report from the U.S. Bureau of Labor statistics indicated that job growth continues to be sluggish. That update is likely to keep bank rates low, so depositors hoping for higher rates need to take a more active approach than simply waiting for interest rates to recover.
In all, total non-farm employment declined by 131,000 in July. This number was skewed downward by the expiration of 143,000 temporary U.S. Census jobs during the month. The loss of those Census jobs shouldn't be dismissed simply because it was scheduled to happen, because the bottom line is that those lost jobs still represent people coming off a payroll. That means less potential spending entering the economy and still more drain on government resources.
Private employment did grow by 71,000 during July, but that is considered a fairly anemic rate of job growth.
Why employment numbers matter for money market rates, CD rates and savings account rates
Employment growth is critical right now as both an indicator of where the economy is and a driver of where the economy is going. The willingness to hire--or lack of willingness, as seems to be the case--indicates the confidence level employers have in the economic recovery. Clearly that confidence remains low.
Without employment growth and the wage growth that tends to accompany it, the average consumer can't ramp up spending without sacrificing personal savings rates--that is, spending more of their income and leaving themselves less of a cushion. And even if consumers were more willing to dip into savings, accumulated household savings are low enough that this would not represent a sustainable source of spending for the economy.
This macro environment makes it more necessary than ever for savers to take matters into their own hands and shop for the best CD rates, the best deals on savings accounts and the best money market rates. Those rates aren't moving higher on their own, so insisting on a better deal is the only way to raise your rates.
