The news is in!

The News is in!!!  The Bureau of Labor Statistics (BLS) jobs report for January was released this morning, showing that the past three months has been the strongest for job growth that we have seen in 17 years!  In the month of January, 257,000 new jobs were created.  In addition there were massive upward revisions to both November and Decembers figures which is adding a combined 147,000 additional jobs.  The Unemployment Rate, which was expected to remain constant at 5.6%, jumped to 5.7% as more Americans entered the job market.

There is a sense of unstoppable power currently in the job market.  As with a business, there is what is called a “Tipping Point.”  This is a point that is crossed where mass gains are made.  It is inevitable that one a tipping point is reached it will create a ripple effect throughout the rest of the economy.  The challenge now that the Federal Reserve is facing is whether or not they now need to step in to raise rates in order to keep the job growth from overheating our economy.  This is currently a difficult task when inflation is running well below normal levels.  An increase to short term interest rates may slow job growth, but it may also further slow inflation.  This could be more harmful to our long term economic health.

We have maintained a locking bias through this shift higher in mortgage interest rates.  With bonds still unable to find their footing, we will maintain our locking bias until we can reach a point of stability in the market.  We have already broken through several layers of resistance.  As we mentioned early this week, once forced out of a trading channel the move is typically exaggerated.  This is certainly what we have experienced in this situation.