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Momentum of economic improvement slowing

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POSTED April 12, 2012 6:17 p.m.

After a few months of positive economic news, the tide may be turning. Although I won’t say the tide is reversing, there certainly may be cause for concern.

After repeated months of an improving employment picture, the employment numbers for March indicate a possible change in direction. Before we go any further, don’t be fooled by the announcement that unemployment dropped from 8.3% down to 8.2%. The cause of this drop is only due to one factor which is simply that people are leaving the workforce. All of the other metrics related to employment are worse this month than last month.

In February the economy added 240,000 jobs while in March the number dropped all the way to 120,000 jobs added. This is the smallest improvement in job creation we have seen in the last 5 months and the fact that it is coming in the spring time is cause for concern. I am not suggesting that we are heading back into a nose dive employment meltdown, I am just bringing to light that the momentum of improvement is certainly slowing.

Adding to economic growth concerns is that Europe is coming back into focus and has the markets jittery. We have seen debt concerns with Greece, Italy and Portugal….now the focus on Spain and the concern that they are having debt management issues has many investors sitting on the sidelines.

The final kicker creating concern for investors is that the FOMC released the minutes from their last meeting on Tuesday this week. They have made it clear that at the present time they have no plans to provide additional economic stimulus. When you combine that announcement with the concerns of Europe and slowing employment, it is enough to get everyone a little concerned. However… this can be good for housing.

Mortgage rates, after their jump a few weeks ago, have dropped back considerably. I won’t say that we are heading down to record lows again however the concern of rapidly rising rates has gone away. Home purchasing has increased and this past week there was a larger than expected jump of 7.2% in purchase activity. The reason for the jump is being attributed to the fact that many home buyers obtaining FHA financing wanted to get their deal going before the increase in FHA insurance premiums which go into effect April 6. Despite the FHA insurance increase, we have been seeing home purchase activity increasing a little each week for the past month.

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