What the Jobs Report Actually Means for Borrowers

NEW YORK (MainStreet) -- Last week's disappointing jobs report has experts scrambling for answers. It looks like hopes for an accelerating economic recovery were a bit premature. Then again, maybe this was just a bump in the road.

What's it all mean for ordinary folk socking money away for retirement, shopping for mortgages - just trying to make sound financial decisions?

The key takeaway: If you're generally happy with your financial setup, it probably doesn't make sense to do anything drastic, at least not until the situation is clearer.

While the experts talk Treasuries, we have the scoop for you on what a lackluster jobs report will mean for the average investor this month.

The monthly employment report showed only about 120,000 jobs created in March, about half the number in each of the preceding three months. But some pros think unusually warm weather in January and February stole some hiring that normally takes place in March - construction and landscaping jobs, for instance.

And one month's numbers don't make a trend. Overall, December through March looked pretty good. It will take two or three more months to get a sense of whether the recovery is stalling or strengthening.

Still, the March jobs report underscores the fragility of the recovery, and that could help to keep interest rates low longer than many experts had expected. Federal Reserve Chairman Ben Bernanke had said the Fed would keep short-term rates at zero through 2014, but growing numbers of experts had begun to predict recently that a heating economy would force the Fed to raise rates sooner to head off inflation. Now it looks like Bernanke might have been right.

This is good news for borrowers. Mortgage rates may remain at today's extraordinary lows for some time. So there's probably no need to rush out to buy a home to beat an increase. If you worry that home prices could drop a bit more, you can probably hold off buying for a few months to see if they appear to have hit bottom.

At the same time, there's probably no reason to postpone a refinancing, as mortgage rates just can't go much lower.

Things are trickier for income-oriented investors. In the days since the jobs numbers came out, many experts have talked about how this is good news for high-quality bonds like U.S. Treasuries.

But it's important to be aware that these stories are aimed at people who speculate on changes in bond prices. Jitters about the U.S. economy, the European debt crisis and other problems around the world, cause a "flight to safety" which causes investors to buy up Treasuries. That heightened demand pushes up Treasury prices.

That's fine if price speculation is your game. But higher prices drive down bond yields, which is tough on people counting on steady income. This is probably not a good time for income-oriented, buy-and-hold investors to pile into bonds. The 10-year Treasury pays a scant 2%.

If and when the recovery does pick up, your bonds could fall in value as demand shifts to newer bonds with higher yields. You would then have an unpleasant choice between living with below-market yields for the long term, or selling your bonds at a loss.

Given these risks, ordinary bank savings are not so bad. You won't earn much, but your principal will be safe - and available to invest for bigger returns after the economic situation is clearer.