Most people were pretty excited to hear about the December jobs report from the Bureau of Labor and Statistics. After all, in December 2011 the unemployment rate dropped to its lowest point in nearly three years (8.5 percent) and 200,000 new jobs were added to the market place. PNC Financial Services economist Stuart Hoffman actually called the report a “trifecta – more people working, wages up and the average work week up.” Long-term unemployment fell also by 0.6 percent. However, despite these positive developments, the stock market seems to indicate that the improvements simply are not good enough. On Friday of last week, stocks were mixed despite the report while long-term bonds slipped below 2 percent. Since bonds are considered to be one of the least risky investments out there, when their rates fall it means that more investors are buying them and steering clear of more traditional investments, meaning there is a higher likelihood of a weak economy.
Economists are blaming ongoing uncertainty about the eurozone for the market’s lackluster response to the positive news about jobs. Investors are unsure about whether “the U.S. [can] really decouple from the rest of the world,” explains co-manager of the ING Global Bond Fund Michael Mata. They are waiting on more certainty and predictability, adds Michael Materasso, senior vice president and co-chair of the fixed-income policy committee at Franklin Templeton. “The bond market seems to be saying, ‘Don’t tell me about today. Tell me what the economy will be like in the second half of the year,” he said. Other economists believe that the widespread belief that the U.S. is in an unsustainable debt situation that the federal government appears unlikely to do anything about and “general dissatisfaction with…lawmakers” are also keeping a lid on market productivity.
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