Economy Watch: Strength in Employment Numbers?

By Dees Stribling, Contributing Editor

What does 200,000 new jobs in December mean? It’s only one jobs report, after all, but the latest in an increasing string of positive indicators. Presumably what the economy needs now is a continuous string of strong employment numbers months–a freight train’s worth of 200,000-plus increases lasting many months. There have already been six months in a row with net increases of 100,000 or more, and the economy has added about 1.6 million jobs in 2011, with about 1.9 million of those in the private sector, since the public sector continues to bleed workers.

Besides the headline numbers, other unemployment measures are improving as well. The “U-6” unemployment rate, for instance, includes part-time workers who want a full-time job but can’t find one, as well as people too discouraged to look for work. As recently as August, the U-6 stood at 16.2 percent, but as of December it was 15.2 percent. Not good, but not as bad as it was–which is perhaps a fitting description for the entire economy.

Also, according to the Bureau of Labor Statistics, December’s hiring was broad-based, even when accounting for seasonal fluctuations, including gains in retail, restaurants, transportation, manufacturing and health care. Employment in construction neither gained nor lost ground in December, which might count as moderately good news for that long-suffering industry. Employment in professional and business services changed little in December for the second month in a row, but added 42,000 jobs per month, on average, during the first 10 months of 2011.

Refi rumor moves markets

Late last week bank stocks rose suddenly on rumors that the Obama administration was mulling a plan to allow any homeowner with a GSE-backed or -owned mortgage to refinance at 4.2 percent or less, provided they are current on their payments. Where did the rumor come from? Maybe a Federal Reserve white paper released last week discussing expanded government refinance, though not precisely the 4.2 percent refi scheme. Or perhaps it was an analyst report that discussed a recess appointment to the Federal Housing Finance Agency. Or maybe even a blog post by the American Enterprise Institute.

The posting, dating from Jan. 4, was pretty much speculation, breathlessly calling such a possibility the Mother of All Refinancing Plans, asserting that it (might) “help roughly 30 million borrowers save $75 billion to $80 billion a year.” Quite a de facto stimulus, achieved by the president naming someone keen on the refi to replace the current acting director of the Federal Housing Finance Agency, which is the conservator of Fannie Mae and Freddie Mac. (The posting was not, incidentally, sympathetic to the plan, citing moral hazard.)

In any case, Wall Street, in its standard rational fashion, ran with the rumor. The White House later denied that any such mass refinancing plan is in the works. That hasn’t dampened other speculation, however–or at least anonymously sources news reports–that describes how the administration is cooking up a deal with the five largest mortgages servicers to give them a pass on foreclosure irregularities in exchange for reducing principal on their mortgages (which would presumably leave MBS investors on the hook).

CRE values steady

Green Street Advisors reported on Friday that its Commercial Property Price Index was unchanged during December. In fact, the consultancy noted, property values have drifted sideways for the past several months after a two-year rally that saw them rebound to within 10 percent of their all-time highs. Low-return hurdles continue to provide pricing support, but this has recently been offset by uncertainty surrounding the economic outlook.

Wall Street wasn’t all together impressed with the employment numbers on Friday, ending mixed again. The Dow Jones Industrial Average lost 55.78 points, or 0.45 percent, and the S&P 500 was down 0.25 percent. The Nasdaq, on the other hand, eked out a modest 0.16 percent gain.