September 7th, 2010 12:51 PM by Mel Samick
While U.S. citizens were busy celebrating an early start to Labor Day weekend, the labor market data for August came in better than expected. Though unemployment increased to 9.6 percent -- meeting the expectations of investors -- revised figures from previous months showed that the labor situation was not as bad as originally projected. Overall payroll jobs in August declined 54,000 after falling a revised 54,000 in July and 175,000 in June.
The jobs report from the public sector continued to disappoint... but in the current economic situation when most of the state and local governments are lacking funds, it was expected. Investors were looking to the private non-farm payroll results to gauge the strength of economy; non-farm payrolls increased by 67,000, above investors expectations, after a 71,000 gain in July. Other than retail trade, all other sectors added jobs. On the other positive side, there was a slight increase in average hourly earnings while the average work week remained the same. Better-than-expected employment numbers triggered treasury yields and stocks to rise and recover earlier losses.
The stock-market started last week on a down note, as investors were uncertain about the future of the economy... but positive global news and better-than-expected domestic economic news helped stocks end the week in positive territory. The minutes from the recent FOMC meeting indicated that businesses are reluctant to increase staffing, as they are not sure about future taxes, regulations, and health-care costs. They prefer to increase the working hours instead of the work-force. But one thing is sure to bring the economy back on course and bring investor confidence back; the White House has to come up with another stimulus package. There was news this weekend that President Obama is considering a $50 billion stimulus to invest in infrastructure as well as tax relief for businesses. It will be a big boost for the economic recovery and politically beneficial for the Democrats too, as mid term elections are looming in the very near future. By week's end, the S&P closed at 1,104 while the Dow ended the trading week at 10,447.
In other positive news, August Consumer Confidence jumped to 53.5 from 51.0 last month. The August ISM Index rose to 56.3 from 55.5. In the Housing sector, Pending Home Sales rose 5.2 percent, a major boost to the troubled housing sector. Buying stocks resulted in Treasury yields spiking higher. The 10-year note yield ended the week at 2.70%, a 28-basis point rebound from its intra-week low of 2.45%. With upward pressure on government yields, mortgage rates also moved up rust rate was around 4.24 percent at week's end.
Information provided AmTrust Bank Capital Markets