Markets around the world fell yesterday on news of disappointing US job growth, with most indexes in the US and Europe sinking at least 1%. The median forecast by analysts was 203,000 new jobs in March according to Reuters, while actual results were 120,000. For comparison, the past three months have exceeded 200,000 new jobs. The unemployment rate only decreased by .1% to 8.2%. This is a worrying sign as it could mean that the recovery is slowing or that the gains that we’ve seen over the past few months were unsustainable. Either way, it means that we still have a while to go before we return to a normal unemployment rate.
This has struck fear in markets around the world, as it means that the US may not have as much of an ability to help with a global recovery as is needed. This is especially important, as there are many doubts as to whether Europe will be able to escape its debt crisis without further injury, and many worry that China’s economy will fall hard.
In particular, Spain has been trying hard to get out the message that it will be able to fix its debt problems soon. Personally, I’m not feeling optimistic. Spain’s economy has taken one of the hardest hits in Europe, and they have very high public debt that isn’t helped by their political structure. If they do cut their deficit, what will it come at the expense of? The taxpayers of course. This will lead to further economic problems. Its a vicious cycle. What is interesting is the idea of a partial fiscal amnesty program, which was announced in the most recent series of proposed budget cuts, though I doubt it would bring the $2.5 billion that the government estimates. These are criminals, but I’m sure they do have some business sense. I doubt they’re going to start paying taxes just because they can.
In short, hold off on the stock market for now. It’s going to be a bumpy ride for now.