Earlier this month employment growth for December was announced
at 155,000 new jobs. This was a good but not great showing for the
job market, which largely sums up the economy for 2012. The
question is, what kind of year does that set up for 2013?
The U.S. economy continued to grow throughout last year, but not
strongly enough to give any lift to CD, savings and money market
rates. December's job growth was a good example. The Bureau of
Labor Statistics announced that 155,000 new jobs were created in
December. This was about in line with November's job growth of
161,000, a number that benefited from an upward revision of 15,000
in the latest report.
This level of job growth indicates that the economy is not
slipping into a recession, but has not yet generated enough
momentum to make a serious dent in unemployment and drive interest
rates upward. What's left now is to look ahead rather than
Growth and the fiscal cliff
Perhaps the most encouraging thing about December's employment
growth is that it took place in the shadow of the fiscal cliff.
Uncertainty is bad for business conditions, and it would have been
natural for employers to put off hiring plans until the fiscal
crisis was resolved.
If the economy managed 155,000 new jobs despite that huge
uncertainty, it creates hope for what kind of job growth will come
in January, after at least one major aspect of the fiscal cliff --
the tax question -- had been resolved. The stock market certainly
reacted favorably in the immediate
aftermath of the tax deal
. The question now is whether employers will show similar optimism
in their hiring plans.
Impact on the Fed
Besides the general state of the economy, another important
influence on interest rates is the
. The Fed has made it clear that it will do everything it can to
keep interest rates low as long as the economy is weak, and the key
aspect of the economy the Fed is focused on is employment.
December's employment growth was not enough to budge the
unemployment rate from 7.8 percent. It will take stronger growth to
lower that number, and a sustained period of such growth to get
unemployment down to the 6.5 percent target the Fed has set for the
threshold at which it would start to back off from its low interest
Outlook for savings accounts
Because of the Fed's policy, and because growth generally gives
banks more incentive to offer
higher interest on deposits
, a stronger economy is the key to whether rates on savings
accounts rise in 2013. Between a decent employment number for
December and a stimulus-friendly tax deal, recent weeks have
brought some optimistic signs for savings accounts.
The key to 2013 will be whether growth can start to gain
momentum. The first real sign of that will come with the January
employment report, which will be released in early February.