Investors focus on jobs report and Europe

(MoneyWatch) Investors needed to rest up over the long Labor Day weekend, because it's going to be a busy week. The highlight will be the August jobs report, which is expected to show that 125,000 new jobs were created and the unemployment rate remained at 8.3 percent, matching the highest level this year (January and February). As of July, the economy has added a total of 1.06 million jobs this year, or about 150,000 jobs per month. If that pace were to continue for the entire year, the unemployment rate will probably still be above 8 percent by the end of the year.

While there has been progress on job creation since the depths of the recession - the economy has added 3.8 million jobs since employment bottomed in February 2010 - there are still 5 million fewer total jobs since before the recession started. A recent report from the Bureau of Labor Statistics examined what happened to workers who were laid off from 2009 to 2011. Of these workers, 56.9 percent had jobs as of January (of those re-employed, approximately one-third reported earnings losses of 20 percent or more); 27.5 percent were still unemployed; and 15.7 percent had dropped out of the labor force altogether.

The BLS numbers jibe with a new report from the National Employment Law Project, which found that during the recession (2008 Q1 to 2010 Q1), jobs vanished across the whole economy, but "were concentrated in mid-wage occupations. By contrast, during the recovery (2010 Q1 to 2012 Q1), employment gains have been concentrated in lower-wage occupations." In other words, not only is there a jobs crisis, there is actually a "good jobs" crisis.

The key to getting the unemployed back to work and to creating "good jobs" is economic growth, which at an annualized rate of 1.85 percent for the first half of 2012, is pokey at best. After the Republican and Democratic National Conventions, voters will try to determine which candidate can solve the economic conundrum. That said, the man who may have the greatest impact on growth and job creation in the near-term is not running for office; he already has the job of president...of the European Central Bank.

ECB President Mario Draghi bailed on the Fed's Jackson Hole confab due to "the heavy workload foreseen in the next few days." This week, the ECB Governing Council will meet and after, Draghi will hold a press conference to outline the details of his yet-to-be-named plan to rescue Europe. If European officials can't convince investors that a plan is in place, markets will be roiled and the economic reverberations will be felt from Brussels to China to the U.S.

Channeling his inner-Ben Bernanke, last week Draghi wrote an editorial, in which he noted that "fulfilling our [the ECB's] mandate sometimes requires us to go beyond standard monetary policy tools." Now he must cajole Germany and wealthier eurozone nations to support some form of central bank intervention -- maybe to buy Spanish and Italian bonds when yields rise above a targeted level, in exchange for increased oversight over national budgets and a new, expanded bank oversight.

As we enter a new month, it's worth mentioning that September has been the cruelest month for stocks. Over the last 50 years, the Dow has seen an average decline of approximately 0.80 percent. (October has averaged gains of 0.50 percent.) Last September the trend was in tact, as the S&P 500 dropped 7.2 percent. Perhaps 2012 will prove the previous data wrong.

-- DJIA: 13,090, down 0.5% on week, up 0.6% on month, up 7.1% on year

-- S&P 500: 1,411, down 0.3% on week, up 2% on month, up 11.8% on year

-- NASDAQ: 3,066, down 0.09% on week, up 4.3% on month, up 17.7% on year

-- October Crude Oil: $96.47, up 0.3% on week, 9.6% on month, down 2.4% on year

-- December Gold: $1,687.60, up 0.9% on week, up 4.6% on month, up 7.6% on year

-- AAA National Average Price for Gallon of Regular Gas: $3.83

THE WEEK AHEAD:

Mon 9/3: US MARKETS CLOSED FOR LABOR DAY

EU Finance Ministers' Meeting

Tues 9/4:

Motor Vehicle Sales

10:00 ISM Mfg Index

10:00 Construction Spending

Weds 9/5:

7:00 MBA mortgage purchase applications index

8:30 Productivity and Costs

Thurs 9/6:

ECB Governing Council meeting - press conference to follow

7:30 Challenger Job-Cut Report

8:15 ADP Private Sector Employment Report

8:30 Weekly jobless claims

10:00 ISM Non-Mfg Index

Fri 9/7:

8:30 August Employment Report