During the last week the US stock market declined due to the weakness seen in the US labor market (Non-Farm Employment Change turned out to be worse than expected) and the continuous debt problems in Greece.
The biggest decline was seen on Wednesday (2.2%). Most risky assets found themselves under pressure because of the disappointing data on the amount of vacancies in private companies and the ISM’s poor PMI value. The unfavorable news on Greece’s debt problems completed the negative picture and made the market decline further.
Moody’s Investors Service changed Greece’s rating from B1 down to Caa1, with a negative forecast (including the possibility of default). According to the historic data, a debt-ridden country which undergoes a rating decline down to Caa1 defaults on its debt with a 20% chance within a year and with a 35% change within 3 years.
All the 10 sectors fell together with S&P500. The Conglomerates sector showed the strongest decline. The Consumer Goods sector was the weakest among the defensive sectors. Healthcare and Services were flat.
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May’s Non-Farm Employment Change report showed only 54K new jobs (83K in private companies). It had been expected to show 169K and 180k correspondingly. Both the values are below the 3-month average value (220K and 244K correspondingly).
The unemployment rate reached 9.1% (as opposed to the expected 9%). The average weekly earnings grew by 0.3%. The latter was a pleasant surprise, however the current inflation rate makes the surprise less pleasant. Despite the 1.8% increase in the hourly earnings over the last 12 months, the inflation rate makes the real earnings value decline.
In May the amount of the long-term unemployed (people who haven’t worked for the last 27 weeks) increased by 45.1% of the net amount of the unemployed against 43.1% seen in April.
Still, the amount of new jobs is growing, even though the growth is not strong enough to influence the overall unemployment situation and buying power in the USA.
The overview is provided by the Department of Portfolio Investments, .
