Sunday, September 9, 2012

After Another Disappointing U.S. Employment Report .....

On Friday, the U.S. Department of Labor reported August data that included:
  • Payrolls increased by a lower than expected 96,000,
  • Unemployment dropped to 8.1%,
  • Labor force participation rate (people either working or looking for work - 16 years and older) dropped to 63.5% - the lowest since Sept. 1981,
  • 368,000 people left the workforce and
  • Percentage of adult males in the labor force dropped to its lowest level since 1948.  
With the national political conventions over, job growth is now the number one topic confronting President Obama and Mitt Romney as they move toward the November 6 presidential election. For investors, the focus this week is - will the U.S. Federal Reserve announce additional stimulus in response to the weak employment data? 
MY TAKE
  • Regarding the presidential campaign, an already close contest just became closer. With voters increasingly skeptical about Washington politicians, each candidate must now motivate “swing voters” to: 1) swing in their favor and 2) show up and vote on Election Day. 
  • Regarding the markets, while investors are hoping for additional stimulus actions by the Fed, there is increasing concern about the effectiveness of its efforts to improve the overall economy. 
  • Bottom line: markets may trend higher, but they may do so with significantly less investor conviction.

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