WORKIN' NINE TO FIVE... WHAT A WAY TO MAKE A LIVIN'..." Dolly Parton.

But unfortunately, last week's Jobs Report was worse than expected, showing more and more people aren't workin' nine to five or any other kind of full time job. So what does this mean for our economy and home loan rates? Read on to find out.

Last Friday's Jobs Report showed that 131,000 jobs were lost for the private and government sectors, versus the 87,000 job losses expected. To add insult to injury, the revisions for June showed nearly 100,000 more jobs lost than had been previously reported. While some of the losses were due to the government laying off temporary census workers, the private sector was also disappointing, showing 71,000 job creations for July, worse than expectations of 83,000... and well short of the market's hope of 100,000. Rounding out the report, the Unemployment Rate remained steady at 9.5%, just below the 9.6% anticipated.

In addition, something to keep in mind is that the State governments are now under major pressure because of growing budget deficits. 

With tax revenues declining and budget cuts needed, States are finally having to make cuts like the private sector already has. As they start to catch up in making cut-backs to headcount, this could cause the unemployment rate to worsen. Not very good news, as an improvement in the labor market is needed to fuel the economic recovery... and especially disappointing, considering the money that has been injected to try and remedy this situation.

Also in the news, the Commerce Department reported last week that Personal Spending and Incomes were unchanged in June, due to a slowing of the economic recovery in the spring. In addition, the Savings Rate increased as consumers cut back on spending.

Why is all this significant... and what does it have to do with interest rates? It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent, and passes from one hand to another, or

one business to another. The speed at which this money passes between parties is called the velocity of money. With the job market still very sluggish, consumers aren't spending much money these days... and businesses are still reluctant to spend money making investments in their business. With present velocity at low levels, inflation remains subdued... however, once velocity increases, the excess money in the system will cause inflation.

And remember, inflation is the arch enemy of Bonds and home loan rates... which means that even the scent of inflation can cause home loan rates to worsen. 

While we certainly want to see better Jobs Report numbers in the future, Bonds and home loan rates were able to benefit from the poor report. Remember, weak economic news often causes money to flow from Stocks to Bonds as traders seek to protect their investments in the safer haven of Bonds. As a result, Bonds and home loan rates ended the week slightly better than where they began.