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Weak job growth in July has stocks looking lower

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As if some of the recent economic data hasn't been sign the economy has been growing at a slower rate in recent months, this morning's July non-farm payrolls showed the economy added just 6,000 jobs, which was well below economists' estimates for 68,000 and slower than June's revised higher 66,000 (preliminary was 36,000) additions.

The Labor Department said that total hours worked fell 0.6% to an average of 34-hours per workweek, the lowest since October. The unemployment rate remained at 5.9%.

The economy has added 94,000 jobs in the past three months after shedding 1.6 million since the peak of early 2001. July's 6,000 new jobs marks the first time in more than a year that the economy added jobs for three straight months.

However, economists are now saying that the weaker-than-expected jobs report for July should add to the growing chorus that the economy's recovery is fragile that it could dip into another recession.

A look inside the numbers shows that manufacturing firms cut 7,000 jobs and the average hours worked dropped by 0.4 hours to 40.7 hours, which was the lowest since February. Construction firms cut 30,000 jobs.

The services sector added 46,000 workers in July, including 12,000 in retail, the first gain since April. Within services, health cared added 29,000 jobs. Temporary help-services firms cut 35,000 jobs after adding 145,000 jobs from February through June. The temp help sector is highly sensitive to growth in the economy.

One unexplained bright spot in the data: the number of workers who have been unemployed longer than five weeks plunged by 340,000 in July, bringing the median duration from 11.7 weeks to 8.6 weeks.

All of this has stock futures edging lower as S&P futures (sp02u) trade down 4.10 points at 879.80. NASDAQ futures (dn02u) are down 4 points at 913.00 and Dow futures (dj02u) are lower by 28 points at 8,450.

Fair value for the S&P 500 today is $0.75. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.65 and set for program selling at $-2.05. Fair value for the NASDAQ-100 today is $2.55.

Jeff Bailey
Senior Market Technician
Option Investor

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