One thing that has made the recent economy so challenging is
. The latest twist was actually a positive one -- a surprisingly
encouraging jobs report at a time when the economic recovery seemed
to have lost momentum.
On March 3, the Bureau of Labor Statistics reported that 279,000
new jobs had been created, between the employment growth for April
and upward revisions for previous months. Employment growth in
April was responsible for 165,000 of those new jobs.
Upward momentum for jobs
While 165,000 is slightly below the monthly average of 169,000
for the past year, the number was encouraging because it exceeded
expectations and represented a strong improvement over the original
figure for March, which was just 88,000 new jobs.
That original March figure was revised upward by 50,000 in the
latest report, and February's figure was revised upward by 64,000
new jobs. Add these revisions to April's job creation, and the
total comes to over a quarter million new jobs in the latest
The stock market climbed to new highs within days of the job
news, and the bond market also reacted to the renewed hopes for the
economy. Bond yields jumped immediately on the employment news, and
then continued to climb in the days that followed.
For bank customers, this could have a variety of long-term
ramifications. It raises hopes for savings accounts because
stronger economic growth should eventually mean higher
. By the same token, the prospect of higher rates means that
current mortgage rates may be a limited-time-only bargain for
potential home buyers, as well as homeowners who want to
The economic road ahead
Is this the turning point that will see economic growth finally
accelerate? Given that unpredictability has been the one true
defining feature of this economic recovery, it is too early to say.
However, it is not too early to prepare for what might happen if
that's the case.
Stocks may continue to rise if growth strengthens further, but
keep in mind that if interest rates start to rise, it will create a
bit of a
headwind for stocks
. With the market having already rallied by 15 percent so far this
year, it's biggest move may have come in anticipation of better
news, leaving less potential for further gains should the economy
Savings accounts should eventually see higher rates if bond
yields continue to rise, but expect banks to lag behind the bond
market at a cautious distance. Banks may be quicker to raise
mortgage rates, since current mortgage rates are so low they
represent a risk to banks if interest rates start rising.
Before any of this plays out, however, the economy will have to
prove it can sustain this momentum. The next jobs report, due in
early June, will be a key indicator. In the meantime, the latest
news remains a positive twist rather than a definitive turning