Jobs Market Continues to Sway Investors
Indications of a Wall Street rally at the beginning of May were short-lived as investors reacted negatively to troubling jobs reports in both the United States and Europe, despite a few encouraging signs relating to the US economy. Following the announcement by payroll processing company ADP that the US created fewer jobs in April when compared to March (119,000 and 201,000 respectively), the Dow Jones industrial average dropped by 87 points before ending the day at 13,268.57 points, being down 10.75 points. This was a sharp turnaround from the previous day when US manufacturing reports lifted the Dow to close at its highest point in over four years. The S&P 500 fell 3.51 points, closing at 1,402.31, while the Nasdaq ended the day up 9.41 points at 3,059.85
Some investors were quick to point out that market fluctuations such as this are not necessarily indicative of the general direction the market is taking. Citing strong first-quarter earnings, many believe that stocks will climb for the balance of 2012, even if in a two steps forward, one step back fashion. Of the 330 S&P 500 companies to have reported Q1 earnings up to 77 percent have exceeded the expectations of analysts.
Investors are no doubt keen to view the US government’s job market figures on the public and private sector to be released tomorrow (Friday May 4), as these figures often vary to a great degree from those released by ADP. The job market and unemployment rate remain strong indicators of a country’s economic health, so the fact that the unemployment rate in the 17 countries using the Euro as currency rose to 10.9 in March is cause for concern among investors as was evidenced by the fall in markets across most of Europe, including Germany, an economy considered to be the strongest in the troubled Eurozone. US analysts have noted, however, that bad news out of Europe is not having as great an impact on US markets as it did when Europe began experiencing problems.
A survey of thirty-two leading economists by the Associated Press revealed that the general consensus is that economic recovery will reduce unemployment to 7.9 percent by the time Americans vote in November, noting that it is unlikely to fall below 6 percent – a level considered to be an indicator of a healthy economy – for at least three years. Records show that currently up to 5.3 million unemployed Americans have been out of work for six months or more. Clearly, many would welcome any improvement in the job market.