Rate watchers know the drill.
For certificate of deposit rates to rise, we need to see evidence of a sustained economic recovery. While much of the news has been upbeat so far in 2010, something inevitably comes along to undercut any good economic news, and thus keep CD rates low for yet another week or two.
That’s what happened during the past few weeks. Despite data indicating the U.S. jobs picture has leveled out, and despite news that pending home sales rose in February and March, the news from Europe has swamped the economic landscape. There, Greece’s overwhelming public debt picture has led to public riots and the near-ruination of that country’s economy (which still might happen if the European Commission’s austerity program isn’t enacted by the Greek government).
The anxiety over Greece is legitimate, and certainly isn’t good news for bank investors. Economists fear that Greece’s economic woes will spill over into nearby countries that engage in the same high public debt practices that Greece does. If the damage isn’t contained to Greece and spills over to the other countries, as is feared, then Europe could easily fall into a double-dip recession; a scenario that would threaten the many U.S. companies that do business in Europe and consequently keep the U.S. economy down.
The good news back here in the U.S. is that, despite the troubles on the Mediterranean, the economic picture is brightening. The U.S. Labor Department announced Friday that while the U.S. unemployment rate rose to 9.9% in April (from 9.7%) in March, employers did add 290,000 jobs (about 230,000 of them from the private sector — a good sign).
Meanwhile, the National Association of Realtors reports that pending homes sales posted a 5.3% uptick in March — that after an 8.3% rise in February. True, some of that activity can be linked to the homebuyer’s tax credit, which ended in April. But evidence that banks are loosening their purse strings and are lending again (especially with jumbo loans and loans on second homes) should keep the housing market on the right track.