More Signs of a Recession?

The Bureau of Labor Statistics (BLS) report showing new job creations in the month of April came in at a staggering 263,000.  This was well above the 185,000 the market was anticipating.

Another component to the report is the Unemployment Rate, which dropped from 3.8% down to 3.6%. Although all of this seems incredible, a deeper look at the reports actually provides hope for lower mortgage rates in the future. Let’s take a look at “why”.

Although the job creation number is strong, much of this is due to part time jobs. This is the time of year when seasonal summer jobs heat up and when we see part time students flooding the job market. Therefore, this should be factored in and taken with a grain of salt.

More important is the drop in the Unemployment Rate. First of all, this fell for the wrong reason. The Labor Force Participation rate just fell to its lowest point since 2001.  This means that the number of Americans working or even wanting to work is insanely low. This isn’t good news for the Trump Administration, which campaigned on President Obama’s low Labor Force Participation Rate, stating that he would get America working again. Well, this hasn’t happened.

In addition, and the biggest reason for hope of lower rates in the future is that history predicts that the job market is about to turn negative. In 100% of times that the Unemployment Rate hit a cycle low, it was immediately followed by a sharp rise and recession. With the Unemployment Rate now at a 49 year low, how much lower can it go?  I’ll tell you, not much if any. This means the next move will be a sharp rise in the number of Americans out of work. There’s no saying when this will happen, but history tells you it’s something you can count on.

With the BLS report behind us, we will take a carefully floating stance.