The major stock indexes are rallying on a better than expected unemployment number. Non-farm payrolls for the month of July dropped 247,000, less than consensus estimates of 300,000 and the actual unemployment figure dropped to 9.4% from 9.5%.

 

For a brief period there bad news was bad news but we are back to the expectations game where spin always wins. And many analysts believe we are in the midst of a bull market. Here is the lead of the Washington Post’s online story on the number: “Employers throttle back on layoffs, cutting 247,000 jobs— the fewest in a year. Showing offers strong signal that recession is finally ending.”

 

Strong signal? Isn’t it a greater sign of economic weakness that we continue to shed jobs after losing so many already? GDP is down only 1%, lets buy. Only 247,000 jobs were lost, lets go shopping. It doesn’t make sense. Even if GDP were up, it wouldn’t get us back to were we were a couple of years ago and we need an increase of 7 million or so jobs to get us back to employment levels pre recession.

 

While most news wires are reporting this as an extremely positive number and the major stock indexes seem to agree with a strong rally on the heels of one of its best one-month performances in years (more than 1300 points since July 7 in the DJIA), we could be nearing an important turning point.

 

Both the Dow Jones Industrial Average and S&P 500 are near the 38.2% retracement of the move from the all time highs to the March lows.

 

 

Market technician Garrett Jones yesterday put out a release stating that Aug. 7 could be an important turning point in equities. Jones doesn’t think the bear market is over even though he had correctly predicted the recent correction prior to the March lows. He states that Aug. 7 and mid-September can present major turning points.

 

 

 

Dollar back on track?

 

If the rally on a pretty significant drop in non-farm payrolls is not confusing enough, the dollar may be returning to more normal market fundamentals. The dollar for most of 2009 has rallied on negative economic news and has sold off sharply on positive news. The common analysis being that people run to the dollar because of its reserve currency status when the world appears to be coming to an end, and flees from the dollar when a recovery appears to be at hand because of the expected inflation. Today, however, the dollar is rallying on the better than expected employment number.

 

Joseph Trevisani, chief market analyst for FX Solutions, stated, “This a sign that the currency markets are weaning themselves from the good news is bad news for the dollar syndrome and returning to fundamental measures of economic growth and interest rate cycles.”

 

Now if we can get out of the bad news is good news cycle. We have a long way to go before we get back to the employment level prior to this recession.

 

 

 

 

 

Tags: non-farm payrolls

This entry was posted on Friday, August 7th, 2009 at 4:31 pm and is filed under economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.