Friday, August 06, 2004

 

Unemployment numbers disappoint, oil continues to pressure markets.


July's employment reports came out this morning and the underperforming is part of all the major media's headlines. New jobs in July totaled only 32,000, far below analyst's predictions of 235,000. More importantly, June's below expectation numbers were revised down from 112,000 to 78,000. If July's new jobs are revised down as far as Junes, there were only 2 new jobs created last month. For those Americans still languishing without a job, that probably seems accurate.

Surprisingly, unemployment dropped from 5.6% to 5.5%. Both the bond markets and stock markets reacted strongly to the employment reports. The 10 year bond market, which influences interest rates for housing, responded immediately with a 2 point increase in price and a 20 bps drop in yield, one of the strongest one day showings this year. The yields have leveled out a bit, dropping to a 16 bps change. The Dow plunged 70 points on initial news of these reports and has continued sliding to drop 95 points just before noon EST.

Crude oil dropped slightly to $44.21 but the continued controversy with Russian producer Yukos and waffling on production by OPEC leaves many experts continuing to predict $50 per barrel oil in the very near future.

All this data leaves the Fed with an interesting conundrum when they meet Tuesday to consider changing the overnight lending rate. At their last meeting, with positive first quarter numbers, they raised rates .25 of a point for the first time since 2001. Many economists were hoping June's poor numbers were a fluke and July would rebound, but the opposite happened.

The Fed could hold rates steady, but some speculate they may raise them .25 of a point any way as part of a long term course of action. However, Mark Vitner of Wachovia Securities has a great quote saying "If they raise rates after this weak employment report, people will be hollering. George Bush would be hollering the loudest."

To temper this bad news, CNN reposted an article from June 23 stating there are a number of jobs out there with high growth and good wages. It's important to remember that no matter how bad the news is, there are still opportunities out there. We'll report back later today to summarize the day's activities.

This report brought to you by the Top Colleges schools...better jobs in less time.




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