This stock market demonstrates, over and over again, the degree to which bureaucrats and legislators in Washington are influencing trading lately as much (and maybe more than) earnings figures and economic data are.
Today a brutal report showed the U.S. economy lost 598,000 jobs in January. The unemployment rate rose from 7.2% to 7.6%.
And yet stocks rallied on the news. Why?
“The only ‘positive’ of today’s report is that these ugly numbers put even more pressure on policymakers to finally agree on fiscal measures to stop the downward spiral of the economy,” wrote UniCredit economist Harm Bandholz in an instant analysis of the numbers.
I talked with Univest chief economist Gary Wolfer, and he agreed. This week the Obama administration’s political situation got shakier, and support for a stimulus package looked like it was fading a bit.
Now, the jobs numbers are “going to force the hand of the Senate,” Wolfer says. He and other market participants have plenty of criticisms of the stimulus proposals — Wolfer thinks it doesn’t contain enough infrastructure spending and too many extraneous items.
But, he says: “Any stimulus is better than none.”
A major worry remains that it might not be enough.
I like Felix Salmon’s take on the jobs report:
I still think that things are going to get worse before they get worse: I just can’t for the life of me see the engine for any recovery. Certainly the stimulus bill isn’t going to do it on its own — the economic problems facing the US are so large that the government can at best only try to make things slightly less bad than they otherwise might have been.
For workers and long-term investors, complaints about the stimulus proposals are worrying. (And those complaints are all over the map — that bills contain too many tax cuts and not enough, that they’re too large and too small, etc.) All that criticism highlights the possibility that the stimulus plan might not work. Job losses could continue and earnings could continue to slide lower.
Still, traders in the market are betting that, for stocks, some stimulus from the government is better than nothing. And the sooner the better, please.