The US employment report has been eagerly anticipated for some time, in hopes that it would provide more evidence of the job market’s steady progression.
The report was made public on July 3rd; it showed that non-farm payrolls went up to 288,000 in June, which was much more than was anticipated.
Due to this unexpected rise, the Dow Jones Industrial Average surpassed 17,000 on the day the report was released. This reaches a new 1,000-point milestone for the Dow, and is the highest that it’s ever been before.
This astonishing rise comes right after the unemployment rate in the US dropped from 6.3 to 6.1 in June. It was proven that this was due to more Americans becoming employed, rather than leaving the workforce, since the participation rate remained at 62.8 percent. The economy clearly is buffeting the effect of outsourcing jobs that have badly affected other economies.
Things certainly seem to be looking up for America’s burdened economy.
“[The numbers] are just the fireworks the economy needs to brighten up the outlook and improve the confidence readings from consumers and businesses,” Tokyo-Mitsubishi’s chief financial economist Chris Rupkey said.
Obama highlighted the fact that job growth in the country is the highest it’s been since the 1990s. He expressed that “even more progress [could be made] if Congress is willing to work with [his] administration and to set politics aside, at least occasionally.”
He called for “a sort of economic patriotism” that implied collaboration in order to further improve the growing market.
So what does this new high for the Dow signify? Terrance Odean, a University of California at Berkley finance professor, explained that “[he expects] that the biggest effect of hitting 17,000 is that the event gets news coverage and, in the process, reminds (or informs) investors that the market has been going up…I’d expect it to trigger more buying than selling.”
It’s been explained that these big numbers are essentially meaningless – that it’s more of a psychological milestone than anything of true significance to the stock market – however it also means that the emotion that comes from these record highs will motivate investors to sell.
Richard Geist, head of the Congress on the Psychology of investing, said that “these emotional convictions…tend to be contagious, leading to herd mentality.” The sight of all those zeroes will get people interested in selling their stock because they know they’ll make a strong return on their investment.
Whether or not this is a wise choice is up for debate, but over this Independence Day weekend, it’s at least reassuring to hear some good news about the US’ strengthening economy.