The American economy in trouble

08.01.2021 16:05|Conotoxia Ltd Analyst Team

The situation in the U.S. labor market remains dire, as confirmed by today's data published by the U.S. Department of Labor. They showed a decrease in employment in the United States in December, instead of the expected growth.

The market consensus assumed that in the last month of 2020 more than 70 thousand new jobs will be created in the US. However, according to the published data, the number of jobs even dropped by 140 thousand. This means that the U.S. labor market shrank for the first time since April, when we had the biggest impact due to the lockdown caused by the beginning of the pandemic. It was then that 20.787 million jobs disappeared from the market. The decline in employment in the recreation and hospitality sector (-498,000), private education (-63,000) and government (-45,000) was partially offset by growth in professional and business services (+161,000), retail (+121,000), construction (+51,000) and transport and storage (+47,000), according to BLS data. As a result, employment is about half as much as before the pandemic and 9.8 million jobs are missing to compensate. This in turn may mean that two more years may pass before everything returns to pre-pandemic levels.

However, the US data do not seem to be able to significantly influence the financial markets, but only seem to lead to a slight strengthening of the US dollar and to a reversal on US stock indices, which are still close to historical records. The market is still counting on record-breaking forecasts of a rapid economic recovery and more fiscal stimulus during the new presidency of Joe Biden and the controlled by Democrats Congress. It seems, therefore, that the market is returning to the mode that the worse the real economy is, the greater the expectations of the central banks and the state for help and thus the good mood may continue.

Summing up the past week, the Japanese Nikkei seems to have the highest growth rate among the popular stock exchange indices, which grew by more than 5 percent on a weekly basis. DAX and Dow Jones Industrial Average indices, as well as S&P 500 and Nasdaq 100, are ranked second and third, with growth of more than 3 percent, while S&P 500 and Nasdaq 100 are gaining more than 2 percent.


Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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