Amid a widespread fear that the July jobs report would be yet another tidbit of bad news, there is finally a (brief…small) bit of good news: the July jobs report is better than anyone expected:
The job market strengthened in July, a welcome piece of good news that sharply contrasted other recent readings pointing toward an economic slowdown.
Employers added 117,000 jobs last month, well above the 46,000 jobs added in June, and easily topping the 75,000 gain predicted by economists surveyed by CNNMoney.
Weak job reports for both May and June were revised higher, adding a combined 56,000 jobs for the year.
Businesses were busy hiring, adding 154,000 workers in the month, topping forecasts of 100,000 new jobs. But those gains were tempered by a loss of 37,000 government jobs, mostly from state and local governments, where budget shortfalls led to layoffs in July, especially in Minnesota where the government was briefly shut down.
The unemployment rate ticked down to 9.1%. The Labor Department said the improvement was mostly due to people leaving the labor force.
Still, 13.9 million Americans remain unemployed, 44% of which have been out of work for six months or longer.
After a shockingly weak jobs number from June and a spate of other negative economic readings that followed, many economists had been bracing for the worst from Friday’s report.
Could this perhaps serve as a partial break on the stockmarket slide yesterday — a slide widely attributed to growing fears about the worldwide economic outlook, including in the United States? Reuters reports:
World stocks pared losses on Friday and Wall Street looked set for a bounce after a U.S. report showed the U.S. economy creating more jobs than expected in July.
The U.S. Labor Department said payrolls increased 117,000 and the unemployment rate dipped to 9.1 percent from 9.2 percent in June. The latter, however, was mostly the result of people leaving the labour force.
A Reuters survey ahead of the report showed expectations for a rise of 85,000 with the unemployment rate at 9.2 percent.
MSCI’s all-country world stock index was down 0.9 percent after earlier losses of closer to 1.2 percent. The FTSEurofirst 300 of leading European companies even moved into positive territory have earlier sharp losses.
The dollar was down 0.2 percent against a basket of major currencies . Yields on U.S. Treasuries rose.
But make no mistake: the global outlook is not happy. Time Magazine’s Michael Schuman begins his piece this way:
It’s like déjà vu all over again. Or is it?
That’s the question everyone on Wall Street will be asking as they enter their somber offices this morning. Thursday’s bloodletting on U.S. stock markets followed time zones around the globe as investors engaged in a panic-driven global selloff. Tokyo and Seoul were both down 3.7%, and Hong Kong 4.3%. European markets didn’t fare any better in early trading.
The global market hysteria might seem like a flashback to the horrifying days of September 2008, when Lehman Brothers collapsed, a financial crisis gripped the world and we landed in the Great Recession. Does the turmoil today mean we’re heading for a similar global crash?
Before we look at where we might be going, let’s take a glance at where we’ve come from. Why are markets tanking? In my opinion, the only thing surprising about the selloff is that some people seem to be surprised by it. The ascent of stock prices earlier this year, especially in the U.S., was detached from the reality of the world economy.
Investors seemed to be simply ignoring the constant drumbeat of bad news. Growth in the U.S. has been weaker than expected, unemployment remains stubbornly high and the housing crisis is far from over. The euro zone debt debacle is intensifying, with giants Italy and Spain increasingly under pressure. Inflation has forced emerging markets like China and India to slow down their overheating economies. Oil and food prices, while no longer rising rapidly, are still at elevated levels, eating into consumption spending around the world. The optimism at the beginning of the year about the strength of the recovery was way overblown. We are still suffering from the fallout from the Great Recession. Investors were in denial about the obvious risks. Not anymore. Stock markets are supposed to be forward indicators; today investors are just playing catch up.
After some more analysis he concludes:
American policymakers ignored the signs of crisis ahead of the Lehman flame-out; now Europe’s leaders have picked up the torch and have buried their heads in the sand just as deeply. The euro debt crisis has never been a liquidity crisis, though it has always been treated that way. The euro zone chieftains have routinely been slow to act, and when they do, the result is underwhelming.
Now I don’t want to add to the panic driving global markets downward. The recent selloff could be no more than a correction, a gravity-induced return to reality. Markets in Asia recovered from their early lows by the end of the day. But at the same time, the global stock selloff is a result of the inability of the West’s political leaders to tackle their serious economic problems. I’d like to hope that the recent turmoil is not the start of a renewed crisis, but a warning for politicians in Berlin, Brussels and Washington, that it’s finally time to get their collective acts together. Otherwise we can’t dismiss the possibility that the next ticking time bomb could well explode, and another Great Recession could loom somewhere on the horizon.
(Have a good weekend..)
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.