We're a long way from soup kitchens and bread lines, but we aren't out of the woods yet. Image from Wikimedia Commons.

Fingers have been crossed, prayers offered and hands have been wrung waiting for an increase in the number of jobs. Unfortunately, the May jobs report has not revealed a huge increase in the number of jobs available.  This is not to say that there was no improvement, but the improvement was less than anticipated, which caused ripples in the stock market. Fewer than 50,000 non-farming private sector jobs were added, and the biggest job growth over the last couple of months appears to be for the U.S. Census.

Jobs report shows slower growth

The May jobs report by the Department of Labor does have some reason for hope.  That said, it also would seem that the currently high unemployment rate will have to be addressed via attrition.  According to Forbes, the May jobs report showed a gain of 431,000 total jobs. Most were seasonal employment. Of those, 411,000 were jobs with the U.S. Census, which means an increase in unemployment is due in June when Census jobs end.

Private sector slumps

The private sector did not fare well.  Only 41,000 jobs were added overall in non-farming private sector jobs, which is down from 218,000 from the April jobs report.  It’s the lowest month since January for private sector hiring, so it would appear that the rebuilding of the workforce is going to be a slow climb.  On the plus side, however, the unemployment rate dropped to 9.7 percent from 9.9 percent last month.

Stock markets slide

This spring has been a turbulent time for the stock markets. On the heels of the news that job growth had been slower than anticipated, combined with the European debt crisis, the Dow Jones and NASDAQ indexes both slid 1.9 percent, and the S&P 500 lost 2 percent in trading, according to CNN Money.  It would appear that the rebound is taking longer than predicted, both in the stock markets and in the job market.

The Euro made slight gains today. Image from Wikimedia Commons.

After an aggressive plan was put into place to stabilize the value of the Euro, the Euro dollar values began to move on the market. The plan was unveiled by the IMF and European Central Bank to put a massive reserve in place to head off a European debt crisis and aid in the Greece bailout.  The Euro climbed after a lull, and several other major currencies experienced huge swings.  It may not mean too much at the moment, as it doesn’t mean that a modest gain on the Euro means instant money will rain from the sky.

Euro dollar gain only slight

The Euro dollar comparative value, or how much one Euro is worth in American dollars, made only a slight gain, according to the Wall Street Journal.  The Euro was at $1.2732 on Friday, but on Monday, May 10 moved up to $1.2775.  The gain amounted to only 0.2 percent, and the Euro is actually down 10.5 percent so far this year.  Some other currencies gained along with the Euro, like the Australian Dollar, and some others tumbled, such as the Japanese Yen.

Stock markets rebound

Obviously, aside from people who hold more wealth in Euros than dollars, another beneficiary of the Euro dollar climb was the world stock markets.  The Dow Jones jumped over 400 points, Standard and Poor’s saw an increase of over 4 percent for the day of trading after news of the European bailout.  It would seem that some measures of recovery are beginning to take place.The recent near crash of the Dow Jones due to a typo seems to have been abated by good news from the European Central Bank and the International Monetary Fund.

Is the global crisis over?

The global crisis is not over, not by a long shot.  The Greece bailout has yet to even be enacted, never mind any gains or recovery realized.  A Euro dollar gain, and especially one so modest, doesn’t mean its time to break out the Champagne just yet.

Dow Jones surged more than 300 points Monday when the European Union pledged $1 trillion to keep the European debt crisis from going global. Flickr photo.

The Dow Jones surged Monday, reacting to a European Union instant cash loan for avoiding a European debt crisis. The Dow Jones today, in sharp contrast to late last week, rose more than 300 points Monday morning. The Greek bailout and fear that a European debt crisis could spread around the world had investors running scared last week. The stock market lost nearly 1,000 points Thursday when fear, panic and high speed trading triggered a mass sell-off of blue chip stocks.

Dow Jones today and European debt

Dow Jones today sharply contrasts last week’s dive as investors feared the $140 billion Greek bailout would trigger a European debt crisis, stifling a fledgling global economic recovery. The Associated Press reports that in recent months Dow Jones was climbing slowly and steadily on news that the  economy has been growing three straight quarters and job creation is gaining. But the stock market dropped four straight days last week as volatility returned to Dow Jones today. Investors are skittish because big swings were common when the U.S. credit crisis grew in late 2008, and the stock market bottomed out in early 2009.

Dow Jones and the Greek bailout

The Dow Jones and stock markets around the world have been in turmoil as European leaders, despite the Greek bailout, appeared incapable of making decisions to keep debt-ridden countries from defaulting. Moody’s Investors Service reports that Greece may have its credit rating cut to junk within the next four weeks. Greece is already rated junk at Standard & Poor’s.

European debt crisis averted?

Dow Jones surged when European leaders were finally spurred to act on the European debt crisis as the euro dropped to a 14- month low last week. The 16 nations using the euro as currency agreed to offer financial assistance valued at almost $950 billion in loan guarantees from the European Union to countries under attack from speculators such as Greece, Portugal and Spain.

U.S. cavalry to the rescue

The U.S. Federal Reserve and other central banks also pitched in to keep the European debt crisis from becoming a  global financial crisis. The New York Times reports that the Federal Reserve will begin printing dollars and exchanging them for euros to provide some liquidity for European money markets and banks. In a statement, the Fed said the currency swaps were intended to make it easier for European companies, institutions and governments to borrow dollars when they need them, “and to prevent the spread of strains to other markets and financial centers.”

Stock market rebounds with Euro

Dow Jones numbers grew Monday as the rise in the euro and a drop in the dollar pushed the stock market higher. A weaker dollar boosts the price of commodities traded in dollars because they become more attractive to buyers outside the U.S. A drop in the dollar also helps boost earnings at U.S. companies that do business overseas. As investors returned to stocks on Monday, U.S. bond prices fell. Gold also fell. Both surged last week as investors ran from risky stocks toward safer assets.

Photo from Picasa

Hardship leads to opportunity

March, 2009 marked a low point in the global economy including world stocks. The gains have been great on the stock exchanges since that point despite continued economic struggles across the globe. The Associated Press reports that many markets topped 50 percent gains from March through year-end trading. The FTSE 100 Index of leading British stocks gained 15.02 points or 0.3 percent at the close of trading December 31st. That mark means the FTSE 100 Index gained 22 percent for the year. France’s CAC -40 yielded similar gains closing out the year with a 23 percent gain. Germany’s DAX fared even better with a 24 percent annual gain even though it lost a point on the final day of trading. The bull market gains have been fueled by depressed stock prices due to the global recession. The lower prices enticed investors to hunt down bargains and as the recession slowed these stocks yielded high returns.

Asian markets set the pace for the year

The U.S Dow Jones industrial average is expected to post an approximate 20 percent gain for the year. U.S. gains combined with Europe’s impressive gains would be a banner year under normal circumstances. These gains were easily out-paced by the Asian markets, however. China’s Shanghai index and Hong Kong’s Hang Seng rose 80 percent and 50 percent respectively. Analysts predict continued strong growth in both of these markets for the coming year and beyond.

A sobering historical perspective

2009 yielded tremendous growth from where it started to where it finished. Investors can keep smiling if they keep short term blinders on to limit their view. A more sobering perspective can be gained by broadening the scope of the analysis. Even though the U.S. and Europe gained considerably for this year, they are down in the stock market even more from a decade ago. Europe is down 22 percent from a decade ago even when factoring in the 22 percent gain for this past year. France’s CAC-40 is a similar story down 35 percent from ten years ago. Germany fared slightly better with the DAX down only 14 percent from 10 years ago.

Where to go from here

Investors and analysts are trying to get a clearer picture of what will happen with the New Year. They wrangle with the question of whether the stock rally can continue or if it has reached its zenith and will level off to more moderate gains. Many are pointing to the currency exchange rates as a possible arena for better than average gains for 2010. Currency exchange rates have remained relatively steady from start to finish for the year. One indicator has been the rise of the U.S. dollar at year’s end. The dollar was up .3 percent in London to end the year. The optimism stems from investors believing that the U.S. Federal reserve will begin to raise interest rates to head off inflationary tendencies as the U.S. economy continues to show signs of recovery. U.S. rates were at record lows in 2009 with nowhere to go but up in 2010 making the dollar an attractive investment for the coming year.

Image from Flikr

Consumers are looking for more debt relief options as the stock market continues to fluctuate. This week the DOW Jones Industrial average made some drastic changes. The DOW Jones average is a roster of thirty stocks that most effectively weight the Wall Street’s financial climate. The DOW dropped Citigroup Inc and GM Corp. from its system. This is in response to GM’s recent filing for bankruptcy protection.

GM has been part of the DOW system for 83 years. This is a testament to the faltering economy and how different it may be once the recession is over. Travelers Cos. and Cicso Systems, Inc. are both set to replace Citigroup and GM, respectively.

Credit and the DOW Jones average

Many people look to the DOW as a barometer of the overall financial climate of the U.S.  With the DOW making major changes and going through restructuring, people are concerned.

Kelsey Glaser of Charleston, West Virginia said, “My family always used credit, but now that everything is so unknown, we are cutting back on plastic…with industry giants going down like they are, who knows what tomorrow will bring for us, the little guy.”  Glaser is not alone in his concerns.  Many Americans have been cutting back drastically as they maneuver the economy.

With huge corporations falling to the recession, no one is entirely at ease.  More and more consumers are trying to find debt relief options in other ways.  Some are drastically budgeting.  Many are using public transportation.  Some consumers are finding that combining households, reminiscent of the Depression days of the 40s, is the best option for them.  Regardless of the strategy, people are thinking in terms of the future and wanting to sustain themselves until things turn around and improve.

The future economy

With the Dow Jones average restructuring and dropping two industry giants, many economists are saying that though it is difficult news, it is the beginning of the end.

Maury Colevich, economics instructor, stated, “Although things are hard, this isn’t the calm before the stom anymore. We’ve already been through the storm and now things are settling themselves out.  We have to be prepared for that settling to include restructuring and reorganizing of what was typical in the past.  It’s all part of the process.”

Consumers and finances

Consumers are told to view the financial turmoil as temporary.  They shouldn’t take this as a sign of how things will be from now on. Like all things, there is an end.  In the meantime, many consumers are doing serious assessments of their finances, looking for new debt relief options.

One family in Missouri started a clothing-swap in their neighborhood to save on kids’ clothing.  Another family in Pittsburg said they are only going to restaurants that offer them half-off days.  It’s this kind of budgeting that seems to be ushering in a new way of life for Americans.

As one economist, Gail Graedey of Florida State University, stated, “People have made it through the recession, but now they are all going to hold tightly to their new altered lifestyles. … If something helped them with debt relief, they aren’t going back to their old ways just because the industry is better.  Consumers are smart and are going to watch their bank accounts for a while longer.”