Stock market jumps at news that economy added 163,000 jobs in July
Wall Street reacts with glee to higher-then-expected job growth in July, led by the auto sector and restaurants. But for the millions of jobless, the key figure in Friday's report may be the unemployment rate, which ticked up to 8.3 percent.
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“The rally started in Europe, where investors interpreted comments from Mario Draghi, the head of the European Central Bank, in a positive way,” says Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Ore. “Then, the jobs numbers helped to sustain it. Wall Street had lower expectations for the numbers."Skip to next paragraph
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The gain on Wall Street, if it is sustained, would erase loses over the prior three days of the week. However, Mr. Dickson warns that historically August is the poorest-performing month of the year.
Back on Main Street, the top drivers for the job gains in July were the auto sector and some renewed hiring in the restaurant industry.
In the case of autos, which added 12,800 jobs for the month – out of a gain of 29,000 for manufacturing – much of the improvement in jobs was the result of the auto companies delaying their normal summer layoffs that take place when they close assembly lines to retool them for the coming new model year. A main reason for the delay: better-than-expected demand from businesses, which had delayed buying new cars and trucks.
“About one-third of all cars and two-thirds of all trucks are bought by business,” explains Dan Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation in Arlington, Va. “What we are seeing is that the replacement cycle is due – it has gotten to the point where it is too expensive to repair the vehicles; they are not worth fixing any more.”
From the consumer standpoint, relatively low-cost auto loans are available, he notes. “Interest rates for auto loans are very low,” he says.
The improvement in hiring in the restaurant and bar business, which added 29,000 jobs in July, might also be a good omen for the economy, says Mr. Dickson. “If people are eating out more, that’s a good sign,” he says.
Dickson says he and his wife were eating out recently at a Macaroni Grill, a national chain. “The manager told me that business was up about 6 percent year over year,” he says. “But [customers] are spending less per visit – ordering fewer desserts.”
In Atlanta, the Olmstead Restaurant, a new fine-dining Southern establishment opening this fall, is now looking to fill between 20 and 40 jobs, ranging from cooks to front-of-house managers.
"Our take on the market is that it is fairly strong here in Atlanta," says Hunter Jefferson, one of the principal owners. He says they “feel very optimistic about the economy right now.”
July also brought an increase of 49,000 jobs for professional and business services. Within that group, temp services added 14,000 jobs. Sometimes an improvement in temp hiring is a prelude to businesses getting ready to hire more people full-time.
However, employment of government officials continued to decline, as it has all year. According to the BLS, there was a decline of 9,000 government jobs in July.
Mr. Brown says the overall jobs numbers, while better, need to be sustained.
“It’s only one month,” he cautions. “We need to see the trend continue.”