Mortgage Trends This Week: July 6

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Welcome to “Recovery Summer” where our nation’s elected leaders have launched a public relations campaign designed to reassure the American public that the U.S. economy is on the road to recovery.

At the heart of the program are ten new “major projects” that will represent the next phase of the American Recovery and Reinvestment Act (more colloquially known as the “stimulus” plan). The taxpayer-funded program is being touted as a big jobs creator – 600,000 in the next hundred days, according to a June, 2008 statement from WhiteHouse.gov.

But the first 100 days of the Recovery Act yielded very few jobs – about 150,000 U.S. jobs “created or saved,” according to White House statistics. But many of the jobs created were temporary ones, with the U.S. Census one of the few organizations hiring in great numbers.

It gets worse. The Brookings Institute estimates that, right now, a “jobs gap” exists in the U.S. that stands at 11.3 million. That gap indicates the number of jobs it would take to return to pre-recession U.S. employment levels. “How long will it take to erase this gap,” the institute asks in a July 2 research paper entitled “June’s Employment Numbers Highlight America’s Increasingly Distressed Communities.”

“If future job growth continues at a rate of roughly 208,000 jobs per month, the average monthly job creation for the best year for job creation in the 2000s, it would take 136 months (more than 11 years),” says Brookings. “In a more optimistic scenario, with 321,000 jobs created per month, the average monthly job creation for the best year in the 1990s, it would take over 57 months (almost 5 years).”

That scenario doesn’t include “saved” jobs, if that’s even measurable – it’s just about jobs that need to be created to close that jobs gap.

Maybe that’s why more and more Americans aren’t buying any talk of recovery – at least a significant one. Consumer confidence is down  - way down – this summer. According to the Conference Board, worries about jobs and the economy have driven the board’s monthly consumer confidence index down to 52.9 in June, the lowest level since March, 2010. Economists had already revised the May number downward to 62.7.

"Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence," said Lynn Franco, director of Conference Board's consumer research center. "Until the pace of job growth picks up, consumer confidence is not likely to pick up."

Unfortunately, the numbers show that the duration of unemployment is heading higher, and that path could lead to a widening jobs gap and even further economic weakness. The U.S. Bureau of Labor & Statistics breaks the duration of unemployment like this:

2010 Month Average length of unemployment duration:
March: 20.0 weeks
April: 21.6 weeks
May: 12 23.2 weeks
June: 25.5 weeks

The Labor Department also has a number for the growing armies of Americans who have left the workforce and have given up looking for a job – and when you add that number to the ranks of the unemployed, the real U.S. unemployment rate is 16.5%. The private sector did add 83,000 jobs to the U.S. economy in June, but the overall jobs number contracted by 125,000, primarily because 225,000 Census workers were laid off.

The point of the story? It’s simple. Government officials can talk of a “recovery summer” all they want, but the truth is that the unemployment number is an anchor in the water to any genuine economic progress.

For mortgage rate watchers, that’s the ultimate “good news-bad news” scenario. As the BankingMyWay Weekly Mortgage Rate Tracker attests, mortgage rates continue to sink, and that means rates are lower than ever. But to strike a deal, you’ll need a great credit rating (of 740-and-higher), and enough liquidity to convince a shaky mortgage lender to give you a loan.

Overall, it’s not a pretty picture, but there’s no sense sugar-coating it. As the Conference Board consumer index numbers show, the American public is wise to what’s going on with the economy. But if you have the cash, the credit rating, and the confidence to step in and buy a new home when so many are not, then we’re really talking the deal of a lifetime here.

For the week, here’s the skinny on mortgage rates, as measured by the BankingMyWay Weekly Mortgage Rate Tracker.

Description          This Week   Last Week
One-Year ARM        3.882%      4.732%
Three-Year ARM     4.118%       3.966%
Five-Year ARM        3.751%       3.871%
15-Year Mortgage  4.194%       4.248%
30-Year Mortgage  4.715%       4.786%%

As always, check out the best rates at BankingMyWay’s Mortgage Rate Search. Week-to-week, it’s your best bet for finding the best mortgage rate deal possible.

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