Employment report brings little joy for savings, money market accounts
January 10, 2011
If interest rates on savings accounts, money market accounts, and CDs are waiting for the economy to gain momentum before they start rising, don't expect them to stand up and applaud for last Friday's employment report.
On the surface, the report may have seemed like good news. The Bureau of Labor Statistics reported that unemployment dropped from 9.8 percent to 9.4 percent during December. However, much of this was due more or less to a technicality, as opposed to real growth in the job market. The number of unemployed persons dropped by 556,000, but only 103,000 of this was due to new jobs. The remainder represents people who left the job market for one reason or another--which could be reflective of people who've given up hope of finding work.
Where do the numbers come from?
Indeed, the long-term unemployed (defined by the government as those who had been jobless for 27 weeks or more) comprise 44.3 percent of the unemployed. This primarily reflects how persistently bad the job market has been, especially in some parts of the country.
This may also partially represent an unintended consequence of extending unemployment benefits. Especially with unemployment rates varying so drastically from one state to another, many people may need to relocate to find a job. As long as benefits continue, people may be less motivated to take such extreme action.
In all, employment rose by 1.1 million last year, or an average of 94,000 per month. December's gain of 103,000 jobs was a little above average for the year, but not enough to represent any building of momentum. It's the same old story for this recovery--the economy may be moving, but it's going so slowly it's hard to notice the progress.
All in all, the employment picture reflects a continued wariness about the economy. Businesses are doing better in general, but are in no hurry to raise costs by taking on new employees. Until the employment report starts showing growth of around a quarter-million jobs a month, expect the reaction of CD, savings, and money market rates to be muted.
