Stock markets had mixed reactions last Friday despite the positive jobs report showing that the U.S economy added 178,000 jobs in November. Dow lost 21.51 points (-0.11%). Nasdaq gained only 4.545 points (+0.09%) and S & P gained 0.87 points (+0.04%).
Jobs report showed that growth exceeded expectations and private and public sectors hired more people. The unemployment rate fell to 4.6% from 4.9 - this last happened August 2007, just before the Great Recession. The only finding that surprised economists are that wages fell slightly; hourly earnings actually declined by 3 cents to $25.89.
According to a Washington Post article, the decline in stocks may have something to do with the expected hike in interest rates by the Fed and events in Europe. Wages have had steady gains during past months, a sign that the labor pool is shrinking that allows workers to demand higher pay. Higher pay translates to more spending that can cause increased rate of inflation. The Federal Reserve will meet on December 13 to 14, and it is expected that they will increase rates, the first time this year, to ease inflation.
Increasing populist activity in the European Union is also blamed for the selloff in US stocks. There is a referendum in Italy, which proposed cutting the number of senators in the government in a move to cut bureaucracy. The problem is that the Prime Minister of Italy, Matteo Renzi, vowed to resign if voters rejected it. If voters rejected the referendum, and along with the resignation of the pro-EU prime minister, investors feared the new government will take steps to bring Italy out of the European Union. That can bring tumult to the Euro that will cause more instability in the market.
The possibility of increased interest rates and unstable worldwide economy forces investors to put money in the banks instead of in stocks. For more business news, check out Jobs and Hire.
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