by Houtan Hormozian | Aug 26, 2025 | CRESTICO, Mortgage
Facing bankruptcy can feel like a major setback, especially when your dream is to own a home. The uncertainty about your financial future and credit score can be overwhelming. But here’s the good news: bankruptcy is not a permanent roadblock to securing a mortgage. At Crestico, we believe in second chances, and our team of Real Estate and mortgage experts is here to show you that buying a house after bankruptcy is an achievable goal.
This guide will demystify the process, outline the necessary waiting periods, and provide a clear action plan to get you back on the path to homeownership.
Understanding Chapter 7 Bankruptcy and Mortgage Eligibility
Chapter 7 bankruptcy, often called a “liquidation” or “fresh start” bankruptcy, is designed to wipe away most of your unsecured debts, like credit card balances and personal loans. While this provides significant financial relief, it leaves a serious mark on your credit report, where it can remain for up to 10 years.
For mortgage lenders, a recent Chapter 7 filing signals a higher risk. As a result, they impose a mandatory “seasoning period” before they will consider your home loan application.
- Conventional Loans: Typically require a waiting period of 4 years from the discharge date.
- FHA & VA Loans: Offer a much shorter waiting period, usually just 2 years from the discharge date.
- USDA Loans: Generally require a waiting period of 3 years post-discharge.
What lenders look for after the waiting period: Your goal during this time is to prove your financial recovery. Lenders will want to see a solid history of on-time payments for any new credit, stable employment, and a healthy debt-to-income (DTI) ratio. Demonstrating that the bankruptcy was a one-time event caused by circumstances beyond your control (like a medical emergency or job loss) can also strengthen your application.
The Chapter 13 Bankruptcy Path to a Mortgage
Chapter 13 bankruptcy is a “reorganization” plan. Instead of liquidating assets, you enter into a court-approved plan to repay a portion of your debts over a three- to five-year period. Because you are actively repaying creditors, lenders often view a Chapter 13 filing more favorably than a Chapter 7. This can open doors to mortgage eligibility much sooner.
- Getting a Mortgage During Chapter 13: Believe it or not, this is possible. Lenders like the FHA may approve your mortgage application after you have made at least 12 months of on-time payments under your repayment plan. You will also need permission from the bankruptcy court trustee.
- Getting a Mortgage After Chapter 13: Once your Chapter 13 plan is complete and discharged, the waiting periods are generally shorter than with Chapter 7.
- FHA & VA Loans: The waiting period can be as short as 2 years from the discharge date, though some lenders may consider you even sooner.
- Conventional Loans: The waiting period is typically 2 years from the discharge date or 4 years from the dismissal date.
Your Post-Bankruptcy Action Plan: Rebuilding for Mortgage Success
Simply waiting out the required period isn’t enough. You need to actively rebuild your financial profile to become an attractive borrower. Here are the essential steps our mortgage advisors at Crestico recommend:
- Re-establish Your Credit (Wisely): Your credit score will take a significant hit after bankruptcy. The best way to rebuild is to open two or three new lines of credit. A secured credit card is an excellent starting point. Use it for small, planned purchases and pay the balance in full every single month. This demonstrates responsible credit management.
- Monitor Your Credit Report: Sign up for a credit monitoring service and check your reports from all three bureaus (Equifax, Experian, and TransUnion) regularly. Ensure all discharged debts are correctly reported as “discharged in bankruptcy” with a zero balance.
- Maintain Stable Employment: Lenders prioritize stability. A consistent two-year history of employment, preferably with the same employer or in the same field, shows you have a reliable source of income to handle future mortgage payments.
- Save, Save, Save: A larger down payment can significantly improve your chances of approval. It reduces the lender’s risk and shows your commitment to the investment. Saving also helps cover closing costs and establishes a healthy financial cushion.
- Keep Your DTI Ratio Low: Your debt-to-income ratio is the percentage of your gross monthly income that goes toward paying your monthly debt payments. After bankruptcy, keep this ratio as low as possible by avoiding new car loans or other significant debts.
The Crestico Advantage: Your Partner in Homeownership
Navigating the mortgage process after bankruptcy can be complex, but you don’t have to do it alone. The rules vary by loan type and lender, and having an experienced guide on your side is critical.
The team at Crestico specializes in helping clients in all financial situations. We understand the nuances of FHA, VA, and conventional loans post-bankruptcy and have strong relationships with lenders who are willing to look beyond the numbers. We can help you create a personalized roadmap to rebuild your credit, determine the right time to apply, and position you for a successful mortgage approval.
Don’t let a past bankruptcy define your future. Contact Crestico today for a free, no-obligation consultation, and let’s take the first step toward your new home together.
by CRESTICO | Jul 25, 2025 | Mortgage
Turning the dream of homeownership into reality is an exciting milestone — but for freelancers, gig workers, and self-employed professionals, the journey often comes with unique twists and turns. Traditional lenders tend to favor predictable paychecks and standard employment histories, making the path to securing a mortgage for freelancers far from straightforward. If you’ve ever felt your hard-earned independence was an obstacle rather than an asset in the eyes of mortgage lenders, you’re not alone. The good news? Innovative and flexible freelancer mortgage solutions are emerging, designed specifically to address the needs of today’s diverse workforce.
As the freelance economy grows, so too do the creative strategies for financing your ideal home. Navigating the home loan process as a self-employed individual calls for resourcefulness, organization, and a willingness to explore options beyond the conventional. Whether you’re just starting to think about buying or are ready to take action, understanding how to present your financial picture and leverage new tools can give you a real edge. In this guide, we’ll share seven empowering ways freelancers like you can overcome common obstacles and secure a home loan for self-employed professionals — proving that with the right approach, your dream home is well within reach.
Understand Your Financial Profile
For freelancers, one of the biggest hurdles to homeownership is proving financial stability to mortgage lenders. Unlike traditional employees with predictable paychecks and W-2s, freelancers often experience fluctuating income and varied clients, making it harder for lenders to gauge reliability. This is why financial institutions scrutinize freelance income and require thorough documentation as part of their freelancer mortgage solutions. Lenders want reassurance that you can consistently meet your mortgage obligations, so it’s crucial to present a clear and convincing picture of your financial health.
Consistent cash flow and meticulous record-keeping are your strongest allies in this process. For example, if you’re a graphic designer with seasonal peaks, maintaining organized monthly earnings reports will help demonstrate steady income over time — even if individual months vary. Lenders prefer applicants who show at least two years of stable or growing freelance income. By tracking invoices, payments received, and business expenses diligently, you not only prepare for tax season but also make it easier to provide proof of income for freelancers when the time comes to apply for a mortgage.
To boost your chances of approval, start building a comprehensive financial portfolio long before starting the home buying process. This should include recent tax returns (preferably two years), Profit and Loss statements, Bank Statements, and a client list or contract history that highlights ongoing work relationships. Consider using accounting software to streamline your record-keeping and ensure everything is up-to-date and accurate. If possible, create a summary statement that explains your business model, sources of income, and how you manage financial ups and downs — this can help humanize your application and make your case more compelling.
By taking these proactive steps, you’ll be better equipped to navigate the unique challenges of freelancer home buying. Remember: transparency, organization, and preparation are key. Not only will this approach make your application stronger, but it will also empower you to negotiate confidently with lenders and find the freelancer mortgage solutions best suited to your needs.
Boost Your Mortgage Eligibility with Strong Documentation
For freelancers, documentation is your strongest ally when applying for a mortgage. Unlike traditional employees, you won’t have W-2s or a predictable monthly paycheck to show lenders. Instead, be prepared to provide at least two years of personal and business tax returns, current profit and loss statements, bank statements, and 1099 forms. These documents help paint a complete picture of your income streams and financial responsibility. If you’ve diversified your work — say, through multiple clients or projects — include contracts or invoices as additional proof of consistent work.
Demonstrating stable income, even in the face of inevitable fluctuations, is crucial. Lenders will look for patterns rather than perfection. For example, if you had a slow quarter but finished the year strong, highlight how your annual earnings remain consistent or are on an upward trajectory. Supplementary documentation like savings account statements or evidence of recurring client relationships can reinforce your case. These details show lenders that you’re adept at managing the ebb and flow of freelance income — a key factor in qualifying for both traditional loans and alternative mortgage options.
Partnering with a knowledgeable accountant can make all the difference in this process. An accountant experienced in working with freelancers can ensure your profit/loss statements are accurate, help you maximize legitimate deductions without underreporting income, and prepare your financials to meet lender expectations. This professional guidance not only streamlines your mortgage application but also strengthens your eligibility by presenting your business asset financing and personal finances in the best possible light.
Ultimately, strong documentation is about more than just paperwork — it’s about telling your unique financial story with confidence and clarity. By proactively organizing and presenting your records, you empower yourself to explore a wider range of mortgage solutions tailored for freelancers. With these tools in hand, you’re one step closer to turning your dream home into a reality.
Leverage Business Assets and Savings
Freelancers often have a unique advantage when it comes to building up business assets and personal savings — these resources can significantly bolster your mortgage application. Lenders want to see that you have the reserves to weather slow periods, and a healthy savings account or robust business cash reserves demonstrates financial stability. For example, if you’ve set aside several months’ worth of living expenses or can show consistent deposits into a business savings account, it signals to lenders that you’re prepared for the unpredictable nature of freelance income. In many freelancer mortgage solutions, these savings can be used to strengthen your application or even serve as part of your down payment.
It’s essential, however, to clearly separate your business and personal finances. Not only does this create a clearer picture for underwriters reviewing your application, but it also simplifies your own record-keeping and tax reporting. Open dedicated checking and savings accounts for your freelance business and regularly transfer your earnings into your personal accounts as income. This organization makes it easier to provide clean bank statements and reduces confusion during the mortgage approval process, especially if you’re considering Bank Statement Loans, which rely heavily on clear documentation of income flow.
Beyond regular savings, don’t overlook the power of retirement accounts or investment portfolios as evidence of freelancer financial health. Even if you don’t plan to tap into these funds for your Home Purchase, showing healthy balances in IRAs, 401(k)s, or brokerage accounts reassures lenders of your long-term financial responsibility and liquidity. Some Loan Programs may even allow you to use these assets as a compensating factor if your income fluctuates seasonally or annually. By highlighting all facets of your financial picture — including business assets, personal savings, and investments — you can present yourself as a secure and reliable borrower, opening more doors to creative freelancer mortgage solutions.
Explore Alternative Lenders and Loan Programs
For freelancers and self-employed professionals, qualifying for a mortgage through traditional banks can feel like navigating a maze of rigid requirements and outdated expectations. Fortunately, today’s mortgage landscape is evolving, with a growing number of alternative lenders who understand the unique rhythms of freelance income. These non-traditional lenders are often more flexible in evaluating your financial situation, focusing on overall cash flow and business health rather than just W-2 forms or pay stubs.
Special loan programs designed specifically for self-employed applicants are also making homeownership more accessible. For instance, some lenders offer “bank statement loans,” where your last 12–24 months of bank statements are used for freelance income verification instead of tax returns. Others may accept profit-and-loss statements or use a combination of personal and business assets to assess your ability to repay. These options recognize that while your income may fluctuate month to month, your long-term earning potential can be strong and reliable.
When comparing these alternative options to conventional mortgages, it’s important to weigh both requirements and benefits. While you might face higher Interest Rates or need a larger down payment with some alternative lenders, you’ll benefit from a more personalized underwriting process that takes your actual financial picture into account. Additionally, many of these programs streamline documentation, making the application process less daunting for freelancers juggling multiple income streams. By exploring these forward-thinking solutions, you can find a mortgage path that truly fits your entrepreneurial lifestyle — turning the dream of homeownership into an achievable reality.
Consider a Larger Down Payment
For freelancers, one of the most effective ways to strengthen a mortgage application is by making a larger down payment. Lenders often see self-employed applicants as higher risk due to fluctuating incomes and unconventional financial profiles. By offering a bigger upfront investment — typically 20% or more — you can offset some of this perceived risk, signaling your financial stability and commitment. This approach not only increases your chances of approval but also gives you access to better freelancer mortgage solutions, including potentially Lower Interest Rates and reduced private mortgage insurance requirements.
Saving for a substantial down payment may seem daunting, especially when your income varies from month to month. However, adopting targeted down payment strategies freelancers can make a significant difference. Consider automating transfers into a dedicated savings account each time you receive client payments, or earmark a percentage of every invoice for your home fund. Diversifying your income streams — such as taking on high-value projects during peak seasons or offering workshops — can also accelerate your savings goals. Remember, separating business and personal finances will help you clearly track your progress and maintain disciplined saving habits.
A larger down payment doesn’t just improve your loan approval odds; it can also enhance the overall affordability of your dream home. By reducing the amount you need to borrow, you’ll likely secure lower monthly payments and save thousands over the life of your mortgage. Lenders may reward your financial prudence with more favorable terms, especially if your credit score tips freelancers toward the excellent range. This dual focus on saving aggressively and maintaining strong credit will empower you to present the most compelling case possible to any lender.
Ultimately, making a larger down payment is an empowering step for freelancers seeking homeownership. It demonstrates financial foresight and resilience — qualities lenders value highly in self-employed applicants. By planning ahead and leveraging creative savings strategies, you can turn the challenge of variable income into an opportunity to showcase your readiness for this exciting new chapter.
Build and Maintain Excellent Credit
For freelancers, a strong credit score is one of the most powerful tools in securing a mortgage on favorable terms. Because self-employed income can appear unpredictable to lenders, your credit profile often becomes a key indicator of your financial reliability. Lenders look closely at your history of managing debt and making timely payments to gauge how you might handle a long-term commitment like a home loan. A high credit score not only improves your chances of approval but can also unlock lower interest rates, saving you thousands of dollars over the life of your mortgage.
Building and maintaining excellent credit begins with simple, disciplined habits. Always pay your bills — credit cards, loans, utilities — on time. Even a single missed payment can have a negative impact on your score. If possible, set up automatic payments or calendar reminders to ensure nothing slips through the cracks, especially during busy work periods or travel for client projects. Keep your credit card balances well below your limits; ideally, use less than 30% of your available credit at any given time. This demonstrates to lenders that you can responsibly manage borrowing without overextending yourself.
Another crucial factor is your debt-to-income ratio (DTI), which compares your monthly debt payments to your income. As a freelancer, this means being mindful of both personal and business debts. Reducing outstanding balances — whether on credit cards, auto loans, or business lines of credit — not only improves your DTI but also signals to lenders that you have healthy financial habits. For example, consider paying down a high-interest business loan before applying for a mortgage to present yourself as a lower-risk borrower.
Don’t forget to regularly review your credit reports for errors or outdated information. Freelancers often juggle multiple accounts and revenue streams, increasing the likelihood of reporting mistakes. Use free annual credit report services to check all three major bureaus, and dispute any inaccuracies promptly. By staying proactive about your credit health, you’ll position yourself as an attractive candidate in the eyes of mortgage lenders — turning your freelance success into a solid foundation for homeownership.
Partner with a Mortgage Broker Experienced with Freelancers
Navigating the mortgage landscape as a freelancer can feel overwhelming, but partnering with a mortgage broker who specializes in freelancer mortgage solutions can make all the difference. Unlike traditional brokers, those experienced with self-employed clients understand the nuances of fluctuating income streams, diverse tax situations, and the unique documentation freelancers must provide. They are well-versed in overcoming the hurdles that often trip up independent professionals and can advocate on your behalf to lenders who may not be familiar with freelance work patterns.
A knowledgeable broker acts as a Bridge, connecting you with lenders and loan products specifically tailored to the self-employed. For example, some lenders offer bank statement loans or alternative documentation programs, which consider your actual cash flow rather than just W-2s or pay stubs. An experienced broker can assess your financial profile and match you to these innovative products, increasing your chances of approval while potentially securing more favorable terms. They also stay updated on changing lender criteria and can alert you to opportunities or new programs designed for freelancers.
When choosing a broker, it’s essential to ask the right questions to ensure they have the expertise you need. Inquire about their experience working with freelancers and how many self-employed clients they’ve helped secure mortgages in the past year. Ask which lenders or loan programs they recommend for independent contractors and how they plan to present your application to highlight your strengths. A reputable broker should be transparent about their process and fees, and willing to share client testimonials or case studies that demonstrate successful outcomes for people like you.
By aligning yourself with a broker who truly understands freelancer mortgage solutions, you’re not just gaining access to a wider range of options — you’re empowering yourself with an advocate dedicated to your homeownership goals. With their guidance, you can confidently navigate the process, overcome common obstacles, and take strategic steps toward financing your dream home.
Empower Your Path to Homeownership
Securing your dream home as a freelancer is entirely within reach when you leverage innovative strategies tailored to your unique financial journey. By understanding your financial profile, maintaining strong documentation, utilizing business assets, exploring alternative lenders, considering a larger down payment, building excellent credit, and partnering with experienced mortgage brokers, you can unlock a wide array of freelancer mortgage solutions. These practical steps not only strengthen your mortgage application but also demonstrate to lenders that you are a reliable and prepared borrower.
Remember, proactive planning and seeking expert advice are key components on your path to homeownership. Embrace your entrepreneurial spirit and take advantage of resources designed for self-employed professionals. With determination, organization, and the right support, you can confidently navigate the mortgage process and achieve meaningful results — proving that homeownership is not just possible for freelancers, but entirely attainable.
by David Glenn | Nov 14, 2016 | CRESTICO
The fact that Interest Rates have dropped to near historic lows as the rents continue to sky rocket in most urban set ups, buying a home seems to tilt the balance to its favor. The reports by Trulia also suggest that for renting to become cheaper than buying, the 30-year fixed mortgage must hit at least 5% in Los Angeles and 5.1% in New York City. However, the mortgage rate has hit a low of 3.17%, making the projection unattainable, at least in the near future.
As much as the statistics favor home buying over renting, for many Americans, the financial tradeoff may not be easy. Numerous advantages come with home ownership, not to mention the tax deductibles on your mortgage interests. But if you don’t carefully analyze your financial situation and make informed choices, home ownership can turn into a financial nightmare.
The most critical component of your decision-making process should be your financial stability. You need to ask yourself key questions like: How stable is your job? How likely are can you get a pay raise or promotion over the coming years? Is your job likely to shift locations or cities? How stable is your marriage or relationship? Is there a possibility of splitting up or divorcing that may occasion untimely disposal of the home? And so on. If the answer to one or more of your questions indicates doubts on whether you will maintain the house within the next five years or more, then it would be pointless to commit yourself, regardless of the mathematics.
Change of Cities
If the nature of your job or appointment involves frequent relocation or change of cities, you may need to evaluate between buying and renting. Many home owners have suffered the cost of servicing mortgages for homes they do not live in. They even spend more resources in renting homes in their new location. Their efforts to sell may be thwarted when the timing coincides with the market lows when the mortgage interest rates rise, wiping out their equity and savings.
Financial Situation
Many Americans are living under strenuous financial situation and may not be in a position to save enough for the down payment. You need to analyze your individual financial status. The ultra-tight Real Estate markets like San Francisco even make it harder for aspiring home owners.
Home Insurance Costs
It is important to know that homeownership doesn’t stop with the acquisition of the mortgage. You’ll need money to settle your property taxes, and the mortgage company will require a proof of home insurance policy. When you rent a house, your landlord will cater for property insurance in addition to some utility bills like water, heating, or power. However, you may need to provide for your rental insurance, which is much more affordable. The policy still provides good benefits of homeowners’ insurance, except that it doesn’t cover the building structure.
Home Maintenance Costs
As a homeowner, you take responsibility for all your maintenance costs like fixing a leaking roof, the parading ants over your kitchen cabinets, broken toilet bowls, electrical breakdowns, and much more. And then there’s the dirty task of mowing your lawn, cleaning the compound, painting the walls, etc. When you decide to rent, most of these tasks will be done by the landlord or an appointed agent.
Bottom line
While it’s true that reduced rates are quite tempting to potential home buyers, you shouldn’t use the statistics to make costly purchases that could turn problematic. You can consider renting affordable housing alternatives like studio apartments as you put aside substantial savings for future investments. That way you’ll be able to make much larger down payment when the markets can’t offer better mortgage rates.
If you borrow less and give a huge down payment, the banks and the property sellers will prefer you over your competitors in a bidding situation. Additionally, your house will appreciate much faster in value as interest rates reduce, cutting down your financing costs.
by CRESTICO | Apr 24, 2012 | CRESTICO
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With Real Estate market again getting heated, the mortgage marketing campaigns in the financial institutions may also be heating up. Just about the most common in the offers tempting consumers will be the offer to get cashback for your mortgage business. This often is accessible for new purchases and also the Refinancing of existing mortgages. It was only a couple of years ago once this was the hottest new offer in the industry. In today&rsquos market it appears that every other lender in the country is offering this cash return option. An example of the standard cash return offer out there is 3% cash return whenever you subscribe to a condition of five years. Now here’s the place that the catch also comes in. Typically if you accept this offer you’re taking the amount of money back option in the place of a rate discount. Just what exactly does this mean to consumers? Keep in mind I would recommend that you crunch the numbers when you jump at the offers available on the market. In today&rsquos market it’s not unreasonable for consumers with a good credit rating and verifiable income to command a single% discount on closed term mortgages. Some consumers are even able to get 1.05% off posted rates about the closed term of the choice. To find out how a numbers figure out, let&rsquos check out a comparison between what you get coming from a cash return offer versus what you save having a 1% rate discount. Let&rsquos assume that you require a whole new $150,000 mortgage that you intend to amortize over two-and-a-half decades (the common). Lets also assume that the posted rate on a 5-year term is 8.35%. With the cash return provide you with will get $4,500 at the time the mortgage is advanced and as a consequence pay a rate of 8.35%. Assuming that all you do is make your minimum payment per month then in the term with the mortgage your total payments will amount to $70,710. After the phrase the main balance outstanding is going to be $138,736.90 If you successfully negotiate 7.35% with a 5-year term (with a 25-year amortization) then your total payments over the term are $64,994.40. After your term the complete principal balance outstanding is $137,158.98. Which means not only do you think you’re making $5,715.60 less in whole payments in the term, but you need to $1,577.92 less principal balance outstanding at the end. Suddenly $4,500 money back doesn&rsquot seem so appealing? I still believe today&rsquos real estate prices and low mortgage rates represent an excellent opportunity for owning a home. If getting 3% cash return helps to make the difference between you being able to afford your house and renting i quickly say do it now. Still, no financial decision must be made without weighing out each of the alternatives. Remember: when the offer seems too good really was &ndash it’s always. |
by CRESTICO | Dec 6, 2011 | CRESTICO
A new analysis suggests that the tide of home foreclosures isn’t going to recede soon. The report from the Center for Responsible Lending, “Lost Ground, 2011,” finds that at least 2.7 million mortgages loaned from 2004 through 2008, or about 6%, have ended in foreclosure and that nearly 4 million more Home Loans (roughly 8%) from the same period remain at serious risk. Put another way, “The nation is not even halfway through the foreclosure crisis,” says the report, which analyzed 27 million mortgages
made over the five years. Across the country, low- and moderate-income neighborhoods and neighborhoods with high concentrations of minorities have been hit especially hard, the report found. The report also noted that certain types of loans have much higher rates of completed foreclosures and serious delinquencies. They include loans originated by brokers; hybrid adjustable-rate mortgages, option ARMs, loans with prepayment penalties and loans with high Interest Rates (subprime). African Americans and Latinos were more likely to receive a high-cost mortgage with risky features, regardless of their credit. For example, among borrowers with good credit (a FICO score of over 660), African-Americans and Latinos received a high-interest-rate loan more than three times as often as white borrowers.
Delinquencies down, foreclosure inventory sets record high
The October Mortgage Monitor report released by Lender Processing Services, Inc. (LPS) shows mortgage delinquencies continue their decline, now nearly 30% off their January 2010 peak. Meanwhile,
foreclosure inventories are on the rise, reaching an all-time high at the end of October of 4.29% of all active mortgages. The average days delinquent for loans in foreclosure extended as well, setting a new record of 631 days since last payment, while the average days delinquent for loans 90 or more days past due but not yet in foreclosure decreased for the second consecutive month. Judicial vs. non-judicial foreclosure processes remain a significant factor in the reduction of foreclosure pipelines from
state to state, with non-judicial foreclosure inventory percentages less than half that of judicial states.
This is largely a result of the fact that foreclosure sale rates in non-judicial states have been proceeding at four to five times that of judicial. Non -judicial foreclosure states made up the entirety of the top 10 states with the largest year-over-year decline in non-current loans percentages. The October data also
showed that mortgage originations are on the rise, reaching levels not seen since mid-2010. Mortgage prepayment rates have also spiked, as much of the new origination is related to borrower Refinancing; loans originated in 2009 and later are the primary drivers of the increase. While FHA origination activity
is down, GSE and FHA originations still account for the vast majority of all new loans – nearly nine out of every 10 new mortgages.
Jobs up, looks better than it is
Job creation remained weak in the US during November, with just 120,000 new positions created, though the unemployment rate slid to 8.6%, a government report showed Friday. The rate fell from
the previous month’s 9.0%, a move which in part reflected a drop in those looking for jobs. The participation rate dropped to 64%, from 64.2% in October, representing 315,000 fewer job-seekers.
The actual employment level increased by 278,000. The total amount of those without a job fell to 13.3 million. The drop in participation rate is significant in that had the labor force remained steady, the jobless rate would have dropped to 8.8%, according to Citigroup calculations. If the labor force had
followed trend growth, unemployment would be at 8.9%. “Overall, the continued modest employment gains reflect an economy that plods along at an uninspiring pace,” Kathy Bostjancic, director
of macroeconomic analysis at The Conference Board, said in a statement. “These modest job gains are still not enough to propel economic growth to a sustainable 2%-plus growth path.” The
measure some refer to as the “real” unemployment rate, which counts discouraged workers, also took a fall to 15.6% from 16.2%,its lowest level since March 2009.
However, economists were treating the rate drops with skepticism. “When the unemployment rate declines, we want to see both employment and participation increase as discouraged workers
return to the labor force. Today, we got the former, but not the latter, making the 0.4% drop look a bit suspect,” Neil Dutta, US economist at Bank of America Merrill Lynch, told clients. “We would not be surprised to see the unemployment rate give back some of its decline in the coming month(s).” Average earnings were essentially flat, up two cents to $23.18 an hour. Private payrolls increased 140,000, considerably less than a report earlier this week showing that nongovernment jobs were up by more
than 200,000 for the month. Government payrolls fell 20,000, including a 4,000 drop in federal positions.
Long-term unemployment remains a big problem: The average duration for joblessness surged to a record-high 40.9 weeks. Stagnation in wages also continues, as more employed workers took
on second jobs. There were just under seven million multiple job-holders for the month, the highest total in 2011 and the most since May 2010. Traders offered little reaction to the report.
Futures already had been indicating a positive open but lost some ground in the ensuing minutes after the Labor Department report hit the tape. “At this pace of job growth, it will be more than two decades before we get back down to the pre-recession unemployment rate. Moreover, a shrinking labor force is not the way we want to see unemployment drop,” said Heidi Shierholz, economist at the Economic Policy Institute. “At this rate of growth we are looking at a long, long schlep before our sick
labor market recovers.”
Remember:
All these scary reports create opportunities for the investor no matter where you live.
