Job Growth Slowdown Equals Disappointment For Savers

It was more bad news for the economy last week, as the employment report for March announced that a disappointing total of just 88,000 new jobs were created during the month. This follows the creation of 268,000 jobs in February, and suggests that the employment market is still as uncertain as ever.

To continue a long-running theme, what's bad for the economy is also bad for savings accounts and other deposits. Low interest rates are closely tied to the chronic weakness in the economy, both for fundamental reasons and because of the Federal Reserve's monetary policy. The latest setback suggests it will be an even longer wait for higher CD, savings and money market rates.

A sharp fall-off in job growth revives lingering questions

The Bureau of Labor Statistics (BLS) reported that 88,000 new jobs were created in March, a figure well below expectations, and a sharp fall-off from February's figure. There was little consolation in the fact that both January and February's estimates were revised upward. While that means that there are more people employed than previously thought, a big part of what matters here is the trend, and the March report disappointed any belief that the trend in the job market might be turning up.

Not only was job creation in March below January and February's numbers, but it was barely half the monthly average of 169,000 new jobs that had been created over the past year.

This slowdown in job creation reiterated lingering questions about what impact government austerity measures are having on the economy. A round of tax increases at the beginning of the year followed by the forced spending cuts of sequestration mean that the federal government has now created two drags on growth. Add to that the uncertainty created by the ongoing budget standoff, and many will trace the recent fall-off in job creation directly to Washington.

A sign of hope?

Amid all the bad news for jobs, there was one potential good sign. In a separate report, the BLS announced that there were about 314,000 more new job openings at the end of February than at the end of January. Job openings at the end of February were also nearly 400,000 higher than they had been a year before.

Although there may be a number of structural reasons why these jobs aren't being filled, the growth in openings creates hope that the disappointing jobs figure for March was simply a question of timing rather than a real slowdown in hiring.

The reaction of interest rates

Interest rates did not react as if they saw any silver lining in the jobs report. While very short-term rates held level because they are already within a few basis points of zero, Treasury bond rates across most of the yield curve, from three months to 30 years, declined in the first week of April.

This suggests that bank rates can be expected to remain low until the job market starts sending more encouraging signals.