On Friday, the U.S. Labor Department reported that 943,000 jobs were added in July, bringing the unemployment rate down to its lowest level since March 2020. The S&P 500 responded to this amazing report with a record intraday high, and the Dow increased 100 points (0.3%). However, the Nasdaq dropped in the red as Treasury yields rose after the excellent job news.
Despite the impressive numbers, many worrywarts believe the labor market is still struggling to recover. In their minds, the Delta variant is a menacing concern, along with the disappointing ADP report on private payrolls, which missed the mark of 700,000 expected jobs by 370,000. Although the ADP report generally runs a different course than the Labor Department report, many investors consider it a good indicator of labor market trends.
This mixed reaction is acceptable for equity investors, who believe a moderate recovery is preferable for all parties concerned. They believe that excessive market enthusiasm will prompt the Federal Reserve to alter its current monetary policy. So, in this case, the doubters serve a useful purpose. Currently, the Federal Reserve has indicated that it is waiting for more positive signs of progress before making any changes.
To the average investor, this market reaction to the US Department of Labor jobs report signifies an acknowledgment that the economy is improving. Still, investors with diverse viewpoints help prevent it from overheating.
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