The news continues favorable for the bond market.
Last Friday morning, the Labor Department reported that only 117,000 full-time jobs were added to nonfarm payrolls in July, and the number of jobs in manufacturing and construction declined. The number of hours in the average workweek was flat and overtime declined.
"There's certainly no excess of growth out there nor any reason to worry about inflation," David Wyss, chief financial economist at DRI/McGraw Hill, said shortly after the employment figures were released.
President Bush, on the other hand, noted that the unemployment rate declined to 7.7% from 7.8% in June, and he said it was a "good precursor" of economic growth. Mr. Bush called it "fairly good new" and asserted the economy is "poised for a strong recovery." It would be difficult to find many economists who agree with him.
In fact, Philip Braverman, chief economist for DKB Securities Corp., emphatically came to quite the opposite conclusion. The U.S. economy, he said is headed for a triple-dip downturn, replete with lower interest rates and a rising number of bankruptcies.
"How could it be otherwise?" Mr. Braverman asked. "Businesses, governments, and individuals are still struggling to deal with oppressive debt burdens by cutting spending, investment, and employment." He also mentioned military spending cutbacks, low confidence levels, and doubts about the stability of the financial system.
Evidence supporting his argument is all around. "GM's Shutdown Brings Increase in Jobless Claims," one Wall Street Journal headline stated Friday. "GM Leaves Factory in Georgia Idle, Cuts Shift in Missouri Plant," said another.
Pessimism isn't limited to the United States. Sir John Quinton, chairman of Barclays, Britain biggest bank, warned last week that the recession in the United Kingdom could go on for another two years. The same day, British Petroleum, one of the U.K.'s largest corporations, cut its dividend in half - its first dividend reduction since World War I - and announced it was slashing its work force by 10%, or 11,500 jobs worldwide.
Bond yields, admittedly, moved higher from Thursday to Thursday, July 30 to Aug. 6, and the Bond Buyer's 20-bond index rose from 5.89% to 6.06% in a market swing that seemed a natural retrenchment after a four and a half month drive toward lower interest rates. The basic trend, as last Friday's return to rising bond prices demonstrated, however, is toward still lower yields. Worldwide economic problems are still simply too far from solution.