Dear John: I am not a Bernanke or Obama supporter. But something good could come out of driving down the long-term Treasury interest rates without printing money.
Most mortgages and many loans are based on the long-term Treasury rates. It could mean a big difference to people looking to buy a new home or to people looking to keep the one they have, if they can refinance in this disastrous job market. Just a thought. F.M.
Dear F.M. You are referring to the most recent brain freeze of the Federal Reserve, which was called Operation Twist, or just plain Twist, or Twizzler or something like that.
The Fed sold short-term government securities and used the proceeds to buy long-term bonds. The idea was to make long-term rates lower and allow short rates to rise.
Mortgage rates are already near 4 percent on a 30-year loan. Could another 0.25 percentage points or so matter?
Sure, some people might be inspired to buy a house if Operation Twist sent mortgage rates lower. But the real-estate market isn’t going anywhere until jobs are created and people feel more secure about taking on 30 years of debt.
Mortgage rates are already super-attractive.
On the negative side, there are investors who count on the slightly higher yields they receive on long-term — rather than short-term — government bonds. So you help the people who might use the lower rate to buy a house, and you hurt savers — again.
You also mention “without printing money.” You are referring to the Fed’s Quantitative Easing (QE) programs.
I think that just about anything is better than the QE programs.
Dear John: I read elsewhere that if you factor out the Birth/Death Model calculation from the last employment report, the actual count of new jobs in March would have been only 30,000, not the 120,000 the Labor Department reported.
Could you please comment? J.P.
Dear J.P. Elsewhere is wrong.
As all my readers know already, the Birth/Death Model is an estimate of jobs being created by newly formed companies, which the government assumes — but can’t prove — exist. Because they are new, the Labor Department can’t phone them for its monthly survey.
So the computers say a certain number of new companies should be forming in a springtime economy, and the Labor Department goes with the guess.
Yes, the government reported 120,000 new jobs in March. And, yes, the Birth/Death Model added a 90,000 estimate to the count.
So “elsewhere” thinks you simply subtract that 90,000 from the seasonally adjusted 120,000 and get the real job growth of 30,000.
That’s not how it works.
The 90,000 guesstimate is actually added to the unadjusted figure, which showed growth of 811,000 jobs in March. So the Birth/Death calculation last month wasn’t nearly as big a percentage of the total gain as some people think.
But that doesn’t mean that the Birth/Death Model should be ignored. In fact, over the next few months the guesstimates should be around 172,000 for April, 211,000 for May and 141,000 for June. Those are the numbers used last year for those months.
So the Birth/Death Model could influence the headline seasonally adjusted figure that we all watch and to which the financial markets react.
Send your questions to Dear John, The NY Post, 1211 Ave. of the Americas, NY, NY, 10036, or john.crudele@nypost.com.
Treasury rates, mortgage rates, Labor Department, Dear John, Model calculation, government bonds, government securities, 1211 Ave. of the Americas, NY, NY, 10036
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