Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus Infection Spread and Deaths Forecast 2020 - Video - 28th Jan 20
Is an Accommodative Fed Bullish for the Stock Market? - 28th Jan 20
Trillion-Dollar Stock Market Cap Club - 28th Jan 20
Corona Virus Wuhan Global Pandemic 2020 Deaths Forecast and Market Consequences - 28th Jan 20
Palladium Surges above $2,400. Is It Sustainable? - 27th Jan 20
THIS ONE THING Will Tell Us When the Bubble Economy Is Bursting… - 27th Jan 20
Stock Market, Gold Black Swan Event Begins - 27th Jan 20
This Will Signal A Massive Gold Stocks Rally - 27th Jan 20
US Presidential Cycle Stock Market Trend Forecast 2020 - 27th Jan 20
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Jobs Report Surprises the Financial Markets Again, Triggering Triple Digit Dow Moves

Stock-Markets / Market Manipulation Aug 07, 2009 - 05:56 PM GMT

By: Sy_Harding


Best Financial Markets Analysis ArticleAs I have been pointing out for many years, the Labor Department’s monthly jobs report has the record for coming in with a surprise in one direction or the other more often than any other economic report, and therefore produces more immediate triple-digit moves by the Dow in one direction or the other in reaction.

It happened again on Friday. Wall Street, and therefore the media, jumped on Friday’s surprise report that only 247,000 more jobs were lost in July, which was better than Wednesday’s ADP report of a loss of 371,000, and better than economists’ forecasts that 275,000 jobs would be lost.

The market immediately took off to the upside, the Dow in a big triple-digit spike-up.

There are a couple of problems with the exuberance over the numbers.

The first is that the rest of the history of the report is that the market’s initial reaction usually only lasts a day or two, and then reverses over the next one or two days.

The second is that, while it was an encouraging report that only 247,000 more people lost their jobs in July, the exuberance is more related to some easing of the severe pain we’ve become used to, of 400,000 and 600,000 monthly job losses, than it is to being evidence of a recovering economy.

For instance, let’s go back to the beginning of the recession, December, 2007.

On January 4, 2008, the Dow plunged triple-digits, 257 points, in reaction to the jobs report that only 18,000 new jobs had been created the previous month, and the unemployment rate had risen to 4.8% from 4.7%. Analysts had forecast a weak report, that only 70,000 new jobs would be created. But only 18,000 new jobs, when it takes 100,000 new jobs a month just to keep up with the growing population? That was horrible, and the market reacted in kind.

Now, after becoming used to 400,000 and 600,000 jobs being lost monthly as the recession worsened, a further loss of ‘only’ 247,000 jobs is a positive, a sign that everything is close to great again?

However, employment is a lagging indicator and not the place to look for evidence the recession is ending anyway. Employment won’t bottom and turn positive until well after the economy has recovered and businesses need to begin hiring again to keep up with renewed demand.
In my daily blog on August 1, I said the recession has probably bottomed – temporarily. I cited as evidence that GDP had declined only 1% in the 2nd quarter; that home sales and housing starts had been up for two or three straight months (although still at extremely low levels); that the ISM Mfg Index rose to 48.9 in July, still under 50, but only fractionally (any number under 50 indicates that manufacturing is still slowing); and U.S. Construction Spending had increased for the 2nd month in a row.

Meanwhile, businesses slashed their inventories at a record pace in the first half of the year, in an effort to bring them down to match the sharp declines in their sales. With shelves on the bare side I said they are likely to rebuild inventories modestly this quarter in anticipation of a pick-up in back-to-school and holiday-driven consumer spending. And since inventory cut-backs had affected GDP negatively in the first half, any degree of inventory replenishment would be enough to pop GDP into positive territory for this quarter.

However, while that would be encouraging, inventory replacement alone will not produce a sustained recovery, but only a one quarter blip up, particularly if anticipated consumer spending does not show up. A sustained recovery would require that the replenished inventory move off the shelves and continue to do so month after month, quarter after quarter, at a quickening pace.

I said that would be problematic given the already record level of consumer debt, continuing scary job losses, banks tightening rather than loosening lending standards, etc., which has had consumer confidence and retail sales declining further as recently as July.
Nothing I’ve seen in the last week has disabused me of that notion.

Among this week’s economic reports, Consumer Income adjusted for inflation declined 1.8% in June, its biggest decline in four years. Auto sales were down sharply again in July (with the exception of a 2.6% increase in Ford’s sales). The ISM Non-Mfg (service sector) Index unexpectedly declined again in July. The ADP employment report was that 371,000 more jobs were lost in July.

Also, keeping in mind that July was the first month of this quarter in which the economy is supposed to begin recovering, and in which businesses will be encouraged enough about the prospects for a pick-up in consumer spending to begin building their inventories again, most retailers reported this week that their same-store sales continued to decline in July. Among them J.C. Penney reported its sales were down 12.3%; Saks down 16.3%; Target down 6.5%; BJs Wholesale Clubs down 9.1%; Nordstroms down 6.9%; Dillards down 12%; Macy’s down 10.7%, Abercrombie & Fitch down 28%, Gap Stores down 8%, American Eagle down 11%.

So, although I still expect inventory build will give us one quarter of positive GDP, I expect thereafter it’s going to be an ongoing struggle for the economy into next year that will create considerable volatility in markets. By the way, that would not be unusual. According to Forbes columnist Gary Schilling, in eight of the last eleven recessions real GDP was positive for at least one quarter, then fell back again before the recession finally ended.

Sy Harding publishes the financial website and a free daily market blog at

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules