Bad News from Labor Dept: What Does It Mean?
New employment numbers are out from the Labor Department today, and it's not good news. The economy lost 4,000 jobs in August -- that's the first loss in four years and significantly worse than economists expected. The unemployment rate is steady at 4.6%. The markets are a different matter, however, with the Dow Jones down 1.5% on the news.
What do the numbers indicate? Pundits and economists are buzzing with reaction, but it all seems to boil down to three points:
- A recession looks a lot more likely now. "If the economy is not headed toward recession, it is very close to one," said Mark Zandi, chief economist at Moody's Economy.com in the NY Times.
- A Fed rate cut on September 18th is all but assured. How much? A quarter? A half? No one knows.
- The fall out from the credit meltdown will spread more widely than some had hoped. "There is no doubt now that financial turbulence is having real effects,'' said Peter Kretzmer, a senior economist at Bank of America Corp. on Bloomberg.com.
- "Even Pollyanna and Mary Poppins would be reaching for the Prozac after reading the August employment report," Richard Moody, Mission Residential Research
- "Interestingly, employment in the financial arena was unchanged in August, so recently announced job cuts in many housing-related finance jobs have not yet hit these figures," Joshua Shapiro, MFR
- "The question now is, "how much will the Fed cut on September 18th." I had been saying 50 basis points before this report and now really that has to be the minimum," Naroff Economic Advisors