As the US economy announced the creation of 42,000 private-sector jobs last month—far more than analysts had expected. All this growth occurs even amid the longest government shutdown in US history. Our nation’s top economists are making clear that this looming shutdown could be disastrous for the economy. As the nation continues to wrestle with these questions, the effects on stock markets and global trade are paramount.
Add retweet in September 42,000 new jobs were added. This figure was way above what economists had been anticipating, with predictions for a much smaller uptick. This jump in jobs is a promising sign of a robust labor market that has endured through outside influences. Unfortunately, the continuing government shutdown casts a long shadow, threatening to reverse this economic advance. The shutdown has quickly morphed into the longest ever in US history. It represents a dangerous threat of creating wide-spread destruction.
It’s worth noting that Federal Reserve Chair Jerome Powell cautioned this kind of expectation coming into the December meeting. He stressed, too, that no amount of monetary policy intervention could mitigate the economic pressures being created by the shutdown. Recession hawks have been aggressively keeping an eye on signals including the S&P 500, a major market-wide indicator, which has been a critical market performance metric. The S&P 500’s behavior will be critical in determining the mood of investors in the face of this uncertainty.
Further complicating the current market is a new variable. It measures the overall marketplace’s condition with seven broadly recognized indicators, and uncovers the current level of fear or greed that investors are experiencing. All 30 indicators contribute equally to the overall score, from 0 to 100. A score of 100 indicates the highest level of greediness, whereas a score of 0 represents the highest level of fear. With uncertainty brewing from the government shutdown that shows no signs of resolution, this will likely only add to the market’s anxiety.
The impacts of this continued government shutdown reach further than just lost job creation here at home. Agriculture Treasury Secretary Steven Mnuchin has seemed particularly worried about its effects on the agricultural sector. Today he unapologetically labels himself as a “soy farmer.” This title is a testament to how this never-ending turmoil is affecting the US soybean market, which exclusively relies on favorable trade relations with China.
China’s role in the US economy is massive, especially as the trade discussion continues. A comprehensive trade deal between former President Donald Trump and Chinese President Xi Jinping appears unlikely. Even on those merits it won’t be sufficient to address either country’s broader economic woes. Among these major sticking points is rare earth with critical materials, used in everything from our defense technologies to advanced manufacturing processes. Yet the outcome of these negotiations will have long-term impacts on the economies of both countries.
Despite all these headwinds, analysts say this new stock market rally maybe has legs. The strength in private-sector job growth speaks to the resilience of our underlying economic fundamentals. Still, investors should be on guard as unforeseen circumstances, especially at the hands of the government, still threaten operating procedures along with global international trade.