The Labor Department reported this morning that the U.S. economy added more jobs than expected in April, on a seasonally adjusted basis.  The increase includes 66,000 temporary Census positions.  The monthly gain was the strongest since March 2006 and gives some hope that labor market conditions are beginning to recover.  Meanwhile, the unemployment rate edged upward as previously discouraged job-seekers re-entered the labor force.  It is likely that the unemployment rate will continue to creep higher even though the economy is adding more jobs as the trend of labor force expansion persists.

The Labor Department reported this morning that the U.S. economy added more jobs than expected in April, on a seasonally adjusted basis.  The increase includes 66,000 temporary Census positions.  The monthly gain was the strongest since March 2006 and gives some hope that labor market conditions are beginning to recover.  Meanwhile, the unemployment rate edged upward as previously discouraged job-seekers re-entered the labor force.  It is likely that the unemployment rate will continue to creep higher even though the economy is adding more jobs as the trend of labor force expansion persists.

Even positive employment data was not enough to provide a rebound following yesterday’s sell-off in the markets.  Despite alleged computer glitches and/or human errors involved in one of the most violent 30 minute periods in stock market history yesterday, sentiment had already shifted to a much more cautious stance this week as Greek credit woes took center stage.  After a solid run-up from lows last March, equity markets were arguably due for a correction anyway, and the growing concerns of a sovereign debt crisis provided a good reason for shorts to come into play.

Much of what happens in the near-term will focus on Europe and whether other troubled nations like Portugal or Spain will need the same aide that Greece did.  There is certainly a level of anxiety that has crept back into the markets which we have not experienced for some time.  Whether a double-dip recession may be in store or not will highly depend on how the European Central Bank handles the crisis and if the European Union can emerge relatively unscathed from this debacle.

The Economy
The U.S. economy added a seasonally-adjusted 290,000 non-farm payrolls in April while revisions showed that the employment situation was also better in February and March than previously reported.  In all, the economy added 559,000 in the past three months which is a strong sign that labor market conditions have stabilized.  However, the unemployment rate increased to 9.9% from 9.7% due to an increase in individuals returning to the labor force now that jobs are becoming more abundant.

In March, personal incomes in the United States increased to $12,239.2 billion compared to $12,203.2 billion in February. Personal incomes are up 3.0% from $11,882.7 billion in March of last year. This is the third straight month that personal incomes have recorded a year-over-year increase and the eighth consecutive month that personal incomes have increased. Personal incomes, nominally, are now back to their highest levels since October 2008.

Housing Market
An increase in the National Association of Realtor’s Pending Home Sales Index for March affirms the surge in activity leading up to the expiration of the homebuyer tax credit at the end of April.  The Pending Home Sales Index increased 5.3% from February levels and was 21.1% higher than it was compared to March of last year.

Last minute buyers rushed to get their signatures on the dotted line before the federal homebuyer tax credit expired last Friday.  According to the Mortgage Bankers Association, purchase mortgage applications rose for the third straight week to their highest levels since early October 2009 in the week ending April 30th which evidences the surge in activity.  Sales activity will likely slow in the coming months, but by how much will be determined by mortgage rates over the next several months, economic conditions, and home prices.

The tax credit expired in a relatively quiet manner this time which leads one to assume that the housing market is on more solid footing.  When the original homebuyer tax credit was set to expire at the end of last November, there was much lobbying from Realtor groups and industry participants to extend the tax credit because housing needed more support at the time.  While there was some word of a possible extension, those rumors were laid to rest as the tax credit expired last Friday.  The housing market will need carry forward without government propping up demand, and only now will we be able to gauge the true health of the market.

National average mortgage rates declined from the previous week to 5.00% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on May 6th.  Rates have not recorded a weekly increase in the past four weeks and are back to their lowest levels since late March.  In the week ending April 30th, the MBA’s seasonally-adjusted purchase index increased 13.0% from the previous week and was up 10.3% compared to the same time last year.  This is the third straight week that purchase applications have increased and the highest the purchase index has been since early October 2009.  Overall mortgage application activity increased 4.0% over the past week due to the surge in purchase activity which helped offset a decline in refinance activity.

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