Every month, the job growth report covering the previous period’s new job creation is distributed to the public. The September 2015 job growth report was recently released, and has revealed some interesting numbers. Due to the oil and gas industry significantly scaling back its operations, overall job growth has slowed down in the United States. This slowing of growth also has implications with the stock market and its investors. Since slow growth equals low interest, stocks generally yield less profits. With so much negative news out there, it’s easy to overlook the fact that everything has a silver lining. In this particular case, low job growth numbers more than likely mean lower interest rates on loans than previously expected. This can lead to an easier time with home payments if you’re taking advantage of the moment and purchasing property.
Not an expert? No problem. Here’s my at-a-glance breakdown of what’s going on:
While unemployment as a whole is stable and fairly low given the economy the last few years, it seem as though we may be heading into a downward trend in job growth for the near future. This unfortunate slowing in job creation is partly due to China’s and Greece’s impacts on the world economy in recent months, piled onto the energy sector, which is having trouble making a profit given the dropping oil prices worldwide. The result? A September increase of a measly 142,000 jobs. As a comparison, a healthy market generally sits at 200,000+. This down trend is coming after encouraging growth earlier in the year. I guess the old saying is true: “When it rains, it pours.” In fact, six of the last eight job growth periods have produced lower-than-projected actual numbers once the tally is completely finalized.
Why is it important?
Investors watch the monthly jobs report for a reason: it’s a pretty accurate indicator of the status of the economy. Since we’ve seen a changing downward trend among these numbers, many are predicting that the Federal Reserve may postpone increasing interest rates later this month. What does this mean for potential homebuyers? More money in your pockets. Interest rates are one of the biggest barriers to home ownership, and having lower rates means increased accessibility to large purchases. However, while interest rates can open a lot of doors on one end, keep in mind that they can actually have a deterring effect on investors in the stock market when they are low, thanks to the lesser returns on investment. When rates shift down, it tells people to take money out of the bond market and move it over to the equity market. Realistically, this downturn isn’t going to continue for an extended period of time, and interest rates will eventually be on the rise again.
All in all, while the economy isn’t in the best shape in terms of new job growth, and the stock market isn’t exactly loving the low interest rates, there’s still a glimmer of good news. With unemployment at a low 5.1%, try to use this recent down trend as a chance to buy that dream home or invest in that property you’ve always wanted to own; you’ll certainly appreciate the lower monthly payments. Whether it’s from international conflicts or domestic reasons, the economy is constantly fluctuating. The market is always going to have its ups and downs, so It’s important to shift your perspective from seeing the down side of the moment to recognizing the opportunities it may open for you.
Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc., the 8th largest retail mortgage company in the country. Since entering the mortgage industry in 1994, she’s consistently been a top producer. Being a VP at Guaranteed Rate offers many advantages to her and her clients including unparalleled customer service, efficiency, and most importantly competitive rates. NMLS: 312874