Reaction to employment/unemployment news

From Reuters:

Weak job growth raises slowdown fears By Tim Ahmann
1 hour, 54 minutes ago



U.S. employers added only 78,000 workers to their payrolls in May, the weakest job growth in 21 months, the government said on Friday in a report that fanned worries on Wall Street over a slowing economy.

The disappointing employment gain -- less than half what analysts had forecast -- initially pushed U.S. government bond prices up sharply as traders guessed the Federal Reserve would soon end its year-long campaign of interest-rate hikes. By early afternoon, however, bonds had given up their gains.

Stock prices, however, fell at the open and never looked back. The blue chip Dow Jones industrial average closed down 92 points, or about 0.9 percent.

The news, however, was not entirely bearish as the Labor Department also said the unemployment rate edged down to 5.1 percent, its lowest since September 2001, from April's 5.2 percent as a survey of households found job growth much more robust.

"What's important is to look at the overall trend ... and in the long run, everything looks very positive," White House economic adviser Allan Hubbard told CNBC television. "Overall, we're doing very, very well."

Many private economists agreed the report likely overstated the economy's weakness, much in the same way a 274,000-job surge in April had overstated its strength.

"The report is moderate -- it is not terrible," said James Glassman, senior economist at JPMorgan Securities in New York. "There is nothing wrong with the economy. What it confirms is that the economy is not out of control."

Still, it was the smallest increase in nonfarm jobs since August 2003 and well below the 185,000 job gain expected on Wall Street.

Some analysts said the Fed, which has raised rates in eight small steps dating to last June, might stand aside after a quarter-percentage point hike at its next meeting on June 29-30, leaving benchmark overnight borrowing costs at just 3.25 percent.

"It presents another puzzling piece of economic data," said Lynn Reaser, chief economist at Banc of America Capital Management in Boston. "They will retain their strategy of raising rates at the end of June, but they will be looking at the data carefully over the (following) six weeks."

A Reuters poll of 22 major Wall Street firms found only one forecasting a Fed pause after this month, while one other was on the fence. But the median forecast put overnight rates at 4 percent by year's end -- a full percentage point up from the current level and a half-point higher than markets expect.

Dallas Federal Reserve Bank President Richard Fisher had fueled speculation the central bank would soon stand pat when he said earlier this week the Fed would enter the "ninth inning" of its rate cycle at its upcoming meeting, a baseball analogy that implied the game would soon be over.

Asked about Fisher's comments on Friday, Fed Governor Edward Gramlich told reporters: "I don't know what inning we're in."


Comment: During the past month, employment numbers are up and the financial pundits claim our economy is doing well. The following month, employment numbers are down, and the same pundits claim our economy is not doing well. Our stock market seesaws with the news as if what the pundits are saying makes any sense. In the mean time, we get mixed messages about what the feds will do on interest rates for the remainder of this year.

Question: Does anybody out there know what the freak'n shet these guys are talking about, and why the market swings with the news on employment/unemployment numbers every month?