U.S. Economy Adds 163,000 New Jobs In July 2012, Unemployment Rises To 8.3 Percent -A Romney Rally?
The U.S. added 163,000 new jobs in the month of July 2012. We were expecting 75,000 +- 25,000 based on the weekly initial jobless claims. The stock market jumped as bond prices fell sharply after four consecutive down days for U.S. equities. The jobs additions for the prior month still didn’t change the headline unemployment number positively which we did expect. In our update yesterday entitled Draghi Disappoints At August 2012 ECB Meeting But Market Takes It In Stride: we expected a change in the overall rate: “The trend in weak economic data will be more conclusive if employment doesn’t grow above trend near 150,000 or more – in spite of any changes in the headline number.
A Romney Rally?
The U.S. stock market jumped on the news the economy had gained a meager 163,000 jobs and unemployment rose to 8.3 percent. The 42nd consecutive week of unemployment at 8 percent or more made the probability that Mitt Romney could win the U.S. election jump. Romney is seen as more business friendly and the market today may be pricing in bad news for President Obama who is dodging the ‘fiscal cliff’ and doubling down on anti-business, one percent rhetoric.
While it’s a stretch that the market is already pricing in who will win the presidential election in November, we believe the market will continue to rally in the intermediate run. The odds that Romney will be a more formidable challenger versus McCain and Palin have risen today. IWM activity shows market participants are going long as volatility drops.