U.S. jobs and Spanish bond yields both disappoint the stock market

07/06/2012 3:04 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Disappointing U.S. jobs numbers this morning quashed whatever optimism traders were feeling after yesterday’s more positive figures in the preliminary and never very accurate ADP report.

The U.S. economy added just 80,000 jobs in June. That was only slightly above the 77,000 added in May. (May figures were revised upwards from the original 69,000.) The June total fell well short of the 100,000 consensus among economists surveyed by Briefing.com.

To me the most worrying part of the report came in the underperformance in the private sector. Yes, the government sector continued to lose jobs—another 4,000 net loss in June—as state and local governments continued to lay off workers in the face of tight budgets. But the private sector added only 84,000 jobs, down from the addition of 105,000 in May. That’s the slowest rate of private sector job creation in 10 months.

The official unemployment rate stayed steady at 8.2% in June. The full unemployment rate, which counts discouraged workers who have stopped looking for work and workers with part-time jobs who would like full-time work, rose slightly to 14.9% from 14.8% in May.

There was some slight good news for the U.S. economy, if not for workers looking for a job, in the report. Average worker earnings rose 0.3% and the average workweek rose to 34.5 hours. That pushed aggregate wages up 0.6%, for the strongest gain in aggregate wages since February. That’s good news for the economy since higher aggregate income means consumers have more to spend.

As you might expect, stocks fell in the United States on the disappointment with the Standard & Poor’s 500 stock index down 1.2% as of 1:45 p.m. in New York.

News from Europe didn’t help either. The yield on the Spanish 10-year government bond hit 7.04% in European trading, back in the danger zone for Spanish debt. The Italian 10-year bond climbed back above 6% to 6.05% Those yields pretty much finish off any optimism, in the short-term at least, that the results of last week’s European summit would stabilize Spanish and Italian bond prices. The euro fell another 0.9% against the dollar to $1.228.

If you’re looking ahead, the next two big dates are July 13 when Beijing will release numbers for second quarter GDP growth in China and July 31, the date of the next meeting of the U.S. Federal Reserve. The consensus among economists surveyed by Bloomberg is that growth in China will show a drop to 7.7% from the 8.1% reported for the first quarter. And, of course, any Fed meeting these days comes with speculation that the central bank will announce another round of quantitative easing.

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