JOBS REPORT

What should we make of the current American recovery? Friday's jobs report was welcomed at first with a huge rally for equity markets, investors were quick to see the bright side. But as the day wore on several nagging doubts rose to the surface.

Despite a dip in the one-tenth of a percentage point dip in the rate of unemployment to 9.4% for July, there was a traditional reversal in the position of the auto-sector within this year's data. This is the time of year when auto-makers tend to shed jobs as plants are retooled. Of course this year the recent chapter 11 filings at Chrysler and GM have seen workers furloughed. The July report had many workers depicted as coming back to work when typically they take a break.

Yet another reason for the drop in the rate was because many workers were simply discouraged from looking for work. The statistic that many naysayers relied on across the weekend media was the fact that so bad is the labor market that many have thrown in the towel altogether.

The participation rate or the proportion of Americans within the labor force actually working was the lowest since the 19080s. Perhaps the least encouraging statistic within the report was the fact that within the number of unemployed persons, more than one-in-three has been out of work for longer than six months.

While we too welcome Friday's report, we're still ever so slightly skeptical over the recovery's wellbeing. Speaking briefly to reporters in the rose Garden outside the White House, President Obama took credit for the recovery and stated that his administration had "rescued our economy from catastrophe."

Yet with every silver lining there must be a cloud, there was indeed some panic in the markets on Friday. Just last week we told our readers to expect some turmoil heading our way in the interest rate markets when we noted the following.

"Markets can and do panic, which is what we're predicting as the next piece of positive news unfolds. That could come in the form of confirmation on Friday of less labor market weakness. With the global rebound in manufacturing data taking center stage and gentle rises in selected housing markets, the real argument for keeping rates low is taking a bit of a beating."- Jurojin Weekly August 4, 2009

You only had to look as far as the interest rate market to get a good sense of that. Bond prices fell sending the yield on the 10-year note to 3.85% for its highest close in eight weeks. Yields are now higher by around 30 basis points in just 10 days or so.

President Obama must be feeling pretty confident in the economic future for the country. Of the $787 billion recovery package, the New York Times estimates that only $100 billion has filtered through to the economy at present. Others say that one-third has. All agree that the remainder is likely to impact the recovering economy through the end of the first quarter of 2010.

July's report also highlights the uncertainty going forward. For all of the red flags that were raise in line with the report, the report still showed 247,000 job losses for the month. Okay, so that was the smallest number since August 2008, but it was still an uncomfortable reading for those hoping for a boost to consumption.

Workers are still wary of what their employers might yet do to alleviate ongoing weakness in consumption. Earlier in the week a credit data report showed a sharp fall in credit taken up by borrowers with consumers choosing instead to bolster their balance sheets as the pace of deleveraging continues.

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