Juicy Details on How the Latest Jobs Reports Could Affect Your Funds
Impact of Recent Jobs Report on Your Savings Plans and Certificate of Deposit (CD) Strategies
Hey there! Here's a sweet lowdown on how the recent job numbers could impact your cash stash.
In an economy where one thing impacts another, one data point can have a considerable ripple effect - like the monthly jobs report, for instance. You might find it surprising to learn its connections with the banking world, but it's a key factor that the Federal Reserve (the Fed) takes into account when making decisions about interest rates.
The Fed's interest rate decisions, in turn, affect what banks and credit unions are willing to dish out for your hard-earned cash. While there's no direct link between the national job market and the bank rates, the jobs report is one of the crucial factors that the Fed considers while deciding whether to raise, cut, or maintain the federal funds rate.
The federal funds rate is crucial for savers because when it changes, the rates that banks and credit unions offer on savings, money market, and Certificate of Deposit (CD) accounts follow suit. A hike in the Fed rate usually boosts bank APYs (Annual Percentage Yield), whereas rate cuts by the central bank lead to a drop.
How Friday's Jobs Report Impacts the Fed's Moves
The April jobs report unveiled on Friday offered a silver lining amidst the apprehension about President Trump's tariff mayhem earlier in the month. Concerns were looming that this economic chaos could cause a jobs slowdown, which could lead to a recession. If that had happened, the Fed might have felt pressured to cut interest rates sooner rather than later.
However, the positive employment data indicates that the labor market is still holding strong - for now. As a result, the financial industry is anticipating revised odds for the Fed's first rate cut of 2025, as stated by the CME Group's FedWatch Tool. Previously, the odds favored a rate cut by June, but after the job report was unveiled, the probability of a June cut has dropped to around 35%. Most traders now anticipate no rate cut until the July meeting.
What This Means for Your Bank Account
If the Fed analysts' forecasts pan out, the top savings rates you can currently enjoy - up to 5.00% APY - could hold steady for a couple of months. Similarly, money market accounts could continue to pay out as much as 4.40%.
The best nationwide CD rates might stay the course for a while. However, it's important to note that when a rate cut appears imminent, CD rates tend to decline sooner than savings account rates. That's because CDs feature rate guarantees for months or years into the future. So, if a Fed rate cut is looking likely at the next meeting, banks and credit unions might start lowering their CD rates ahead of the actual announcement.
In short, it's still a great time to lock in a CD deal. While there's ample time to secure today's rates, there's no guarantee they'll stick around, and a lucrative deal can vanish overnight. Plus, with little chance of a rate hike in the immediate future, the risk for future CD rates is almost exclusively downside risk.
Your Savings and CD Rate Hit List
Here's a quick cheat sheet to help you find the best savings and CD deals in town:
- Top 3-Month CD Rates
- Top 6-Month CD Rates
- Top 1-Year CD Rates
- Top 18-Month CD Rates
- Top 2-Year CD Rates
- Top 3-Year CD Rates
- Top 4-Year CD Rates
- Top 5-Year CD Rates
- Top High-Yield Savings Accounts
- Top Money Market Accounts
Some Quick-fire Notes
- Don't Get Fooled by Average Rates: The national averages generally include rates offered by small banks that pay meager interest. The top rates you can find by shopping around are often 5, 10, or even 15 times higher than these averages.
- We've Got You Covered: Investopedia keeps track of the rate data for over 200 banks and credit unions every day to establish daily rankings of the highest-paying accounts. To qualify, these institutions must be federal-insured, and their minimum initial deposit should not surpass $25,000. It's essential that they don't set a maximum deposit limit of less than $5,000.
- Banks Must Be Widely Accessible: To be considered nationally available, banks must operate in at least 40 states. Credit unions are eligible if they have donation requirements of less than $40. For more info on our selection criteria, check out our full methodology.
- The Federal Reserve (the Fed) takes the monthly jobs report into account when deciding whether to raise, cut, or maintain the federal funds rate, which impacts the rates that banks and credit unions offer on savings, money market, and Certificate of Deposit (CD) accounts.
- A hike in the Fed rate usually boosts bank APYs (Annual Percentage Yield), while rate cuts by the central bank lead to a drop.
- The April jobs report unveiled on Friday offered a silver lining amidst the apprehension about President Trump's tariff mayhem earlier in the month, indicating that the labor market is still holding strong.
- As a result, the Financial industry is anticipating revised odds for the Fed's first rate cut of 2025, with most traders now anticipating no rate cut until the July meeting.
- It's still a great time to lock in a CD deal, as the best nationwide CD rates might stay the course for a while, but when a rate cut appears imminent, CD rates tend to decline sooner than savings account rates.
