Job Market Boost Essential for Recovery
The unemployment rate in January dropped to 9 percent from the previous month’s 9.4 percent, while the 36,000 jobs added to the US economy in the first month of 2011 disappointed economist who were expecting at least 49,000 added jobs. Inclement weather gripping large parts of the US was blamed for the uninspiring job market performance, with the household survey used by the Labor Department to determine the unemployment rate, confirming that severe winter weather prevented around 886,000 people from seeking employment during the month of January. Moreover, the Labor department revealed that 2010 job growth figures previously reported were overstated by around 215,000 and revised figures confirmed that about 900,000 jobs were created in 2010. Economists estimate that in order to make a tangible difference to the unemployment rate figure, at least 300,000 new jobs need to be created each month. Nevertheless the drop in the unemployment figure is seen as a positive sign for economic recovery.
Indications are that in general, stock market investors remain bullish in outlook, with the economy continuing to show signs of improvement. Last week saw the Dow Jones industrial average holding its position above the 12,000 level, with the 10,000 level considered to be an important psychological milestone for investors. It wasn’t only the Dow that conquered psychological barriers. The Standard & Poor’s 500 closed last week above 1,300 points, while the Nasdaq did some climbing of its own, reaching heights last seen in 2008. Corporate results indicating a shift of trend from profits driven by cost-cutting, to growth driven by earnings, also contributed to last week’s pleasing market performance.
The upcoming week offers no especially significant market-moving events, however there are some highlights to watch out for. The week kicks off with President Barack Obama addressing an audience of around 200 influential people at the US Chamber of Commerce. This move is seen as a step toward bridging the gap between Obama and the business community as represented by the Chamber and the job market is likely to be high on the agenda. On Monday afternoon the Federal Reserve’s consumer credit report for December will be made public. Also on Monday quarterly results will be released by Lowes, a leading home improvement retailer in the US.
Wednesday sees Federal Reserve Chairman Ben Bernanke testifying before the House Budget Committee. On the corporate front, Coca-Cola and Cisco Systems will be reporting quarterly results. Before opening bell on Thursday, the weekly report on initial jobless benefits claims will be released, with the Federal Treasury budget due during the day. Friday sees the release of government data on December’s US trade balance, with a report on consumer sentiment compiled by the University of Michigan due out in the morning.