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Slowing American Job Growth
The report of slowing American job growth drove US stock prices in afterhours trading. The markets opened on Monday with losses across the board. Stocks dropped due to poorer than anticipated fundamentals. However, in technical analysis, traders commonly anticipate that the market will overshoot when there is a correction. Thus there are often profits to be made as the correction “corrects” so to speak. That was exactly the case as the NASDAQ and S&P 500 both gapped down on the opening follow the report of slowing American job growth. However, both regained part of the loss in the hour or two following the opening bell. With this snapshot of the markets in mind, just what does currently slowing American job growth mean for the stock trader?
The United States Economic Recovery
The United States economy lost nearly nine million jobs at the start of the worst recession in three quarters of a century. Unemployment has fallen steadily for a year and there has been steady job growth with 120,000 jobs being added last month. Manufacturing jobs have been steadily on the rise but the United States economy is still short about five million jobs from what employment figures were before the 2008 market crash and recession. Analysts expected the jobs report to be similar to the month before with about 200,000 new jobs being added. However, the numbers were half those expected and the market adjusted. It turns out that adding a hundred thousand jobs a months is enough to keep up with population growth. There are the numbers and there are expectations that drive optimism or pessimism in the markets. Whether you are trading the Russell 2000, trading banks, trading Toyota, or trading penny stocks, market sentiment is important as it drives prices ahead of the announcement of fundamentals. The bright spots in adding jobs last month were manufacturing, health care, professional services, and bars and restaurants.
Profits despite Slowing American Job Growth
If the trader looks only at the overall numbers he might believe that the recovery is slowing down. He might also worry about a real estate crash in China, a recession in Europe, or trouble in the Middle East. All of these “big picture” issues are of concern. However, during the last years the US government has slimmed down a bit. The folks who lose government jobs show up on the unemployment rolls. However, they are no longer costing the US tax payer any money. Considering that the size of the US debt is a major issue, the slimming down of the government is a good thing. Also, the US is getting out of Iraq and, soon, Afghanistan. The bleeding of the US treasury due to two foreign wars is about to stop. And, the United States private sector has been adding jobs steadily for two years! The point of this is that, while things may be dicey in Europe and China, they are steadily getting