As rates on savings accounts threaten to disappear into nothing,
the latest jobs report did nothing to provide a boost.
The report on May job growth from the Bureau of Labor Statistics
(BLS) was pretty much right down the middle -- not disappointing,
but not a pleasant surprise either. That kind of mediocre showing
is not likely to move interest rates higher, especially when it
comes to rates on savings accounts and other deposits.
Mediocre employment growth
The BLS reported last week that a net total of 175,000 new jobs
were created in May. That almost exactly matches the average of
172,000 new jobs that have been created monthly over the past year.
In other words, May's job growth was about average by recent
standards, though a little below average if you subtract the 12,000
jobs represented by downward revisions of previous months'
Between tepid job growth and growth in the labor force, the
unemployment rate was virtually unchanged in the latest report, at
What does this job market information say about the economy? It
places the economy in the same holding pattern it's been in for
about four years now: growing, but not gaining any momentum. The
soft job market is both a symptom and a cause of this problem.
Employers lack the confidence in the economy to start hiring in big
numbers. In turn, with people only slowly able to return to work,
just a trickle of new wages are being introduced into the
The other element that has influenced interest rates is the
Federal Reserve's monetary stimulus. The Fed has stated that it
will continue measures to
keep interest rates down
until unemployment falls to 6.5 percent. With unemployment treading
water at 7.6 percent, the Fed looks as though it will keep downward
pressure on rates for the next several months.
A double standard for interest rates
Along with mixed news on the economy, there has also been
something of a double standard on how banks are setting their
Mortgage rates were on the rise throughout May
, suggesting that lenders saw enough improvement in the economy to
expect higher interest rates in the future. At the same time
though, CD, savings and money market rates remained unchanged.
The explanation is that while banks and other mortgage lenders
are anticipating an eventual upturn in economic activity, they
don't necessarily see it happening right away. So, when it comes to
making 15- and 30-year loans, they are eager to protect themselves
by raising rates. However, when it comes to offering
higher rates on short-term deposits
, banks simply don't see the need to do so just yet.
It will take more than a mediocre jobs report to push those
deposit rates higher. In order for that to happen, monthly job
growth will probably have to get to the 200,000 level -- and prove
it can stay there.