The jobs number is out, and just 96,000 jobs were created last month according to the Labor Department, well below economist expectations of payrolls to rise to 125,000. And though the unemployment rate in August dropped to 8.1% from 8.3% in July, it was largely because so many Americans gave up the hunt for work. In fact, 368,000 folks left the workforce last month.
But although investors were disappointed, they’re taking the bad news well—and no wonder, since it’s widely seen that the continued weakness in the labor market may force the hand of the Federal Reserve in providing more quantitative easing.
That’s right—Helicopter Ben Bernanke may be back with more loosening of monetary policy next week at the September 12 and 13 FOMC meeting.
What does this mean for the market? Well, frankly it depends on what Bernanke decides to throw at the problem. The Fed only has so many tricks up its sleeve, and it’s quickly running out of options
In this month’s Emerging Growth September issue, I talk about what more stimulus measures may mean specifically for small-cap stocks, and the answer might surprise you!
As for the broader market, a third round of quantitative easing may provide some additional support for stocks as we lead up to the election in November—but with the S&P 500 already at a four-year high and the NASDAQ at an eight-year high, this isn’t going to do a whole lot to solve the jobs issue.
And considering that jobs growth is one-half of the Federal Reserve’s mandate, Ben has an impossible job. No matter whether we see QE3 or not, the Fed isn’t going to be able to fix the uncertain business climate that’s out there. That’s something that just won’t be resolved until after the November 6 election when we pick the next President.
But the good news is that now that the conventions are wrapped up, we should be firmly on the "positive track" that will lend some support to both the stock market and to consumer confidence.
I’ll keep you updated, have a great weekend!