The end of the week produced significant poor news, especially for those in the stock market. Let’s start with the employment situation, and follow through the negative effects.
Employment Situation
The U.S. Bureau of Labor Statistics released its latest report on the job market, informing us that unemployment rose to 4.3% for July. This is a 0.2% increase, which accounts for 352,000 additional unemployed people in the U.S. The current unemployed population is 7.2 million, which is 1.3 million higher than a year ago. After news that the Federal Reserve will not drop interest rates this week, but future dates remain a possibility, this bad news seems to signal a clear change in direction. It was expected that future meetings would lead to the Fed dropping interest rates this year, but after this bad news, we should not expect any future changes. Many had hoped for a few months of consecutive good news, but this breaks the trend.
More important than the impact on future interest rates and current market performance, we need to evaluate the job market once again. Today millions are looking for work, and the employment environment is confusing to many. As we’ve discussed before, those looking for work spend months, even years, looking for employment. Hundreds (or thousands) of applications are often needed to find an appropriate job for workers. Many had said that the job market was looking better, but this news from the U.S. BLS is the confirmation needed for those who are struggling to find work.
Bad News = Bad Market
The market is slipping today, and we will likely see some dips before the market evens out again. The employment situation was definitely a catalyst for some of the poor performance in the market. After news that the Fed will not drop interest rates and a bad report today, many fear that the Fed waited too long.
We can see in the above image that the S&P 500 dropped upon opening today with the employment situation news. The Dow Jones also had a significant drop, as it is down 1.72% for the day.
Why It All Matters
As we previously thought, the job market in the current economy is not strong. Workers need to continue to plan for the short-term future as well as the long-term future. It may feel difficult to stay in place for a job you are not happy with, but the employment situation shows us that many remain unemployed, and finding a new job is difficult. If you are looking for a new job, try to stay in your current position while searching. If you are looking at your retirement accounts today, you will see a lot of red. No need to panic, as we are in a two-week lull. We don’t know when the market will bounce back, but there has been strong performance over the last several months, and our portfolios will likely be able to afford the latest price drop.
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