Q & A: U.S. Employment, Unemployment… and the Stock Market

1.  WHAT WERE THE RESULTS OF THE JULY EMPLOYMENT REPORT?

Non-farm employment increased by 117,000 jobs while private employment increased by 154,000 jobs. Employment counts for May and June were revised upwards. The U.S. unemployment rate fell from 9.2% to 9.1%, and average hourly earnings rose to $23.10.

2.  WHICH SECTORS ARE RESTRAINING JOB GROWTH?

The State/Local Government sector is still cutting spending and jobs to balance their budgets—this includes 23,000 Minnesota government workers who were laid off in July due to the shutdown and have come back on the job in August. The Construction, Finance, Information, and Hospitality and Leisure sectors are all shedding jobs. 

3.  ARE ANY SECTORS GENERATING NEW JOBS?

There was moderate growth in Manufacturing (supply disruptions from Japan are easing), Retail, Mining, and Healthcare.

4. OK, THE DECLINE IN THE STOCK MARKET… WHAT’S GOING ON?

The Growing Debt Crisis in Europe. Deficit spending and weak banking systems have led to economic crises in Ireland, Portugal, and Greece—three small countries. The same problems have now spread to Spain and Italy—two big countries at the heart of Europe’s economy. US and global investors are worried that a slow European economy will also depress demand for US exports, thereby pushing down future earnings of these firms, and thereby US stock prices.

Uncertainty Stemming from the DC Congressional Circus. Consumers, seeing the political circus in Washington, DC, did something really rational in response to their worries about debts, deficits, and partisan wrangling: They cut back on their spending! US consumer spending was down in July and US/global companies and investors are worried that it will remain low and drag down future corp. earnings—thereby depressing US stock prices.

Lack of Movement on Long-Term Structural Reform. Long-term growth is generated partly by good monetary and fiscal policies and partly by reforms of the regulatory and legal frameworks governing capital, labor, and product markets. Congress’s focus on partisan wrangling over the federal budget meant that it failed to take up reform legislation vital to education, housing, research and development, transportation, reauthorizing the Federal Aviation Adminisration …. and a lot more.

Worries about How Much Longer High Oil Prices will Persist.

— Sumner LaCroix

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