Rates Down After Weaker Jobs Report: +113k Private Sector Jobs, 9.4% Unemployment

Following this morning’s weaker-than-expected December jobs report, mortgage bonds are up 72 basis points, which brings 30yr fixed rates (on loans up to $417) back down below 5%—when bond prices rise on a rally, rates drop. The report showed 113,000 private sector jobs were gained, and the economy added about 1.3m private sector jobs in 2010. Here’s why the report was worse than expected: non-farm jobs estimates called for +150k (vs. 103k actual) and private sector jobs estimates called for +160k (vs. 113k actual). BLS also reported that 14.5 million people are unemployed, which brings unemployment to 9.4%, down from 9.8% last month and up 4.5% since the recession began in December 2007. One optimistic part of the report is that forced-into-part-time workers dropped another 100k after dropping about 200k in November. Charts and more commentary below.

CHART 1: NON-FARM JOB GAIN/LOSS JAN 2008 TO DEC 2010

There are now 8.9 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 4 million since January 2008 but down about 600,000 since September. This is an improving trend, but 8.9m is still large enough to make economic recovery questionable: job loss and unemployment statistics show that these 8.9 million people are employed and therefore not in the job loss category, but because of their job status these workers aren’t likely to be consuming at normal levels.

CHART 2: DECEMBER 2010 JOBS BY SECTOR