Economic Releases and Resulting Market Reactions - Research Paper Example

The US Economy created 113,000 jobs with unemployment rate dipping to a low of 6.6%. Despite more people gaining employment, decline in hiring rates raised concerns of a slower growth. Rather than the economy taking off, it stumbled. Federal Reserve’s much-anticipated announcement a decision to start scaling back, the monthly asset purchases in January encountered a relatively mute market reaction not just in the US but across the globe. Although US equity markets at first fell on news, markets rallied strongly for remaining part of the month coupled with economic activity improvements as well as reassurance from central bank that its major interest rate would most likely remain near zero until after unemployment in the US fell below 6.5%.Hourly wages increased by 5 cents.

As a result of the changes, job changes were recorded with job growth being constrained by sharp decline in public sector. Federal government shed off more than 12,000 jobs, while states and municipalities shed off 17,000 workers. Healthcare increased only 1500 jobs. Consumer spending: consumer spending declined for a 2nd straight month signaling a slowdown in the economy. Retail sales declined 0.4% in January marking the largest drop in the last ten months. The slowing economic fortunes are likely to see further reduction in consumer spending.

The Manufacturing sector experienced expansion as shown in PMI, 51.3% although this was drop by 5.2% compared to seasonally adjusted rate of 56.5% in December. However, the reading being more than 50% indicates expansion of the manufacturing sector. The number of unemployed people (10.2 million) as well as the unemployment rate (6.6 %) recorded little change in January. This is a continuous trend from October which has seen joblessness rates reducing by 0.6%. Of the major work groups 20.7% of the unemployed are teenagers, 5.

7% are whites, 6.2% are adult men, 12.1% are blacks, 5.9%