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2012 Employment Growth Better as CD Rates Move Higher in February 2013

Average CD rates on 12 month and 60 month certificates of deposit actually moved higher this week, which is a nice surprise. Another nice surprise was January's unemployment report which showed more jobs were created in 2012 than previously thought. Granted, the increase in average CD rates was small but these days any increase is good news.

Average 1 year CD rates increased to 0.72 percent this week, up from last week's average of 0.69 percent. Average 5 year CD rates increased to 1.33 percent, up from last week's average of 1.31 percent. While both 1 year and 5 year rates moved higher on average, that wasn't the case for 24 month CD interest rates which declined to 0.76 percent, down from 0.78 percent.

As for January's job numbers report, the number of jobs created last month was 157,000 and the unemployment rate moved up to 7.9 percent, up from December's 7.8 percent. The positive points in the report weren't January's number but the final numbers for the last three months of 2012.

Job growth in the final two months of 2012 was revised upward, a whopping 247,000 jobs were created in November and 196,000 jobs were created in December - a combined 127,000 more jobs above earlier estimates. An average of 181,000 jobs a month were created in 2012, higher than the 2011 monthly average of 175,000.

All this is positive news for the economy and interest rates in 2013. The Federal Reserve's policy is to keep the fed funds rate near zero percent to foster growth but unfortunately, this keeps CD rates low as well. The fed's policy of a near-zero percent fed funds rate is expected to stay in place until mid-2015. They could increase the rate sooner if the unemployment rate falls to 6.5 percent.

While we have a long way to go to get the unemployment rate down from 7.9 percent to 6.5 percent, it could happen before mid-2015. I have to admit after years and years of watching deposit rates falling to record lows, higher rates will be welcome news. Let's hope it happens before mid-2015.
Author: Jason P. Jones
February 2nd, 2013