This morning the August employment report was released and it has given a nice boost to the stock market today. The private sector job growth for the month was 67,000 jobs. Analysts had been expecting the private sector job growth to be only 20,000 jobs. The unemployment rate stayed edged up to 9.6% in August.

The past few weeks has seen all kinds of important economic information whipsaw the market in both directions. We have seen weekly jobless claims reach 500,000, which hurt the market badly. We have seen impressive manufacturing numbers, which helped the market in a big way. For the individual investor, it is certainly hard to tell what to make of the recent economic numbers.

What should you do in this kind of environment with uncertainty about the state of the economy? At this point it seems the economic recovery is still continuing, albeit at an extremely slow pace. As I have said many times before, the biggest key will always be the employment market. If employers start hiring on a larger scale, the growth for the overall economy will definitely show up.

Keep in mind that often times in a recovery from such a terrible recession like the one we saw in 2008 and 2009 it takes quite a while for the growth to get back into high gear. Why is this the case? Quite frankly, everyone is a little scared to invest their money. Personal investors are worried that the same market crash could occur that happened in late 2008. Institutions and money managers are waiting for more clear signs that the economy is strengthening. At the same time, corporations are also scared to put their cash to work. This is precisely why we see so many companies with huge amounts of cash on their balance sheet today.

I think for the next few weeks and months it would be wise to take a wait and see approach to the state of the economy and the stock market. Watch the weekly jobless claims number and the important economic data closely. If you need to be invested in the market in the short-term, it would be wise to consider high dividend yielding stocks because of their relative safety.

Are you keeping track of the corporate earnings results from home? If you are an invested in this market, I strongly suggest you keep a close eye on earnings reports. So far the earnings news from this quarter has been quite good. Some major companies such as UPS, Caterpillar, 3M, AT&T, Intel, and American Express have really topped analyst’s expectations quite easily.

What is most encouraging about the results thus far? The single most encouraging thing about the positive surprises this earnings season is that they are spread out among many different industries and sectors. If a company like 3M is surprising to the upside, it speaks well about several industries. Caterpillar and UPS have struggled for several quarters, so for them to be so upbeat is a welcome change for the market.

If you look closely at American Express and their earnings report, they mentioned that customer spending is almost back to pre-recession levels. As I pointed out in last week’s post, Intel was upbeat about business spending rising in a big way. This combination certainly speaks well for the long-term prospects of the recovery.

Make no mistake about it; there are plenty of obstacles yet to overcome. The unemployment rate is still extremely high and consumers and investors need to regain confidence in the economy and the market. In the short-term I think you should expect continued volatility as the economic news remains fairly mixed. Remember, this is a time of year that the stock market does not typically fare very well. August and September are notorious for being bad months for the market. In light of the fact that corporate earnings results are starting to come around, it may be prudent to start putting together a shopping list of stocks you may want to purchase in the fall after the market has discounted some high quality names.

It’s been talked about for months now, but today the deal was finally reached by negotiators early this morning. The negotiation wasn’t easy and it ended up lasting through much of the night, but lawmakers finally came to a compromise and now the United States Bank Financial Reform Bill is ready to go to a vote in both the House and the Senate.

There is much debate in Washington as to whether this move was the right one to make, with democrats saying it will avert another financial disaster and republicans saying it will slow down the economy in the long run. The only thing that is definitely true at this point is that the landscape is about to change for banks in the United States. The financial industry as a whole is about go through the biggest changes in many years.

There is a delicate balance that needs to be reached where economic expansion can continue without too much regulation, but some regulation needs to be in place in order to keep Wall Street and the banks under control. Derivatives trading will be watered down quite a bit, which is probably a good thing for the safety of the economy. Many lawmakers said that the goal of the bill is to regulate areas where banks and investment firms have found that there was no regulation. These areas were used to run up record profits, but when these markets collapsed, we ended with firms that were “too big to fail.”

In the short-term it is hard to say how this will affect the stock market in the United States. It’s quite unclear as to how this will change the business of some financial firms, but the certainty that a reform bill is now set should help the overall trading pattern in financial stocks. The true test of this bill will be in the long run, when we determine whether or not adequate steps were taken to keep us out of another credit crisis like we saw two years ago.

Earlier this year the stock market in the United States had moved up more than 60% from its low, based largely on the hopes of a strong economic recovery. Fast forward to June 2010 and the market is now in a correction and has lost about 13-14% of its value in the last few weeks. Why has the market reacted so violently in the last few weeks? The single biggest reason for this drop in value is clearly the lack of investor confidence in the economic recovery.

The most recent economic numbers are still better than they had been a year ago, but they are far short of what most had been hoping for. Last week is a perfect example of the level of disappointment that the current economic numbers are bringing. Many economists were expecting 550,000 or 600,000 jobs created, but in reality the May employment report was weak. The census hiring made the number look good, but the private sector created a scant 41,000 jobs in the month. The day before the retail sales figures showed that the consumer isn’t diving back into the economy like many had hoped. The news wasn’t terrible, but it was much less encouraging than many were expecting.

The flash crash of May 6th also hurt investor sentiment and the last thing this market could afford was a bunch of scared individual investors. The summer doldrums is now getting ready to become a more important factor, so don’t be surprised if volume is low in the weeks and months ahead.

The bottom line here is that it is absolutely clear now that there is no V shaped recovery taking place. The recovery isn’t completely dead, but it is on much weaker footing than many thought it might be at this time. The hope here is that this market consolidation will lead to a longer-term uptrend in stocks and the economy, but for now the disappointment is bound to weigh on results in the short-term.

Today the Federal Reserve announced that it would keep interest rates at the current 0-0.25% level. The all important monetary policy statement included some very slight changes in wording, but it was mostly the same as before. The small changes included a bit of an upgrade in their comments on the current state of the economy. The FOMC now says that economic activity is indeed improving and the labor markets are picking up. They included a note about household spending improving, albeit at a slow pace because of constraints on the consumer.

One of the big questions before today was whether or not the FOMC would keep the line about expecting interest rates to stay low for an extending period of time. In fact, they did keep that particularly wording just the same as it has been. Clearly, the Federal Reserve believes things are getting better, but they are being very cautious making any kind of move toward higher interest rates. The situation in Greece has also served to keep the world on notice that the credit crisis isn’t completely over in the global economy.

The next move for the Federal Reserve has to be up since interest rates can’t go any lower. The million dollar question is, when will that move to higher interest rates take place? While Wall Street often trembles at the talk of any raise in interest rates, at some point rates will need to move slowly higher. At first it may cause investors to grow concerned, but in the long run interest rates need to move to a more normalized level. For the many consumers who use money markets and certificates of deposit to increase their savings, a move to slightly higher rates would be a very welcome site.

Interest rates are staying the same for now and they probably will for a while, but next time you hear rates may be moving higher don’t immediately think that will ruin the economy.

Last Friday’s news of the SEC charging Goldman Sachs with fraud wasn’t received well by the market, and that shouldn’t come as a surprise. The SEC has a problem with how Goldman Sachs continued to market their commercial debt obligations to the public while profiting from selling those products short. Goldman Sachs has indicated it won’t be giving up without a fight, because it believes the firm did nothing wrong. The first thought of all the traders on Wall Street was, who could be next? There were plenty of other players in the subprime market and the SEC could well crack down on other institutions.

Uncertainty is never a good thing for the stock market in the short and intermediate terms. I think it is very likely that as more news comes out about this case, the market will worry and stocks could suffer short-term downturns. The short-term aside, I do think the SEC taking this strong stance against a corporation like Goldman could be great for the stock market in the long run.

Why would this help the market? There has been a disconnect between Main Street and Wall Street for quite some time now, and many average citizens perceive the stock market as a shady place. This obviously isn’t good for the market, or the overall economy. Goldman Sachs is the biggest name in the investment banking industry that put our economy into a lot of trouble with the subprime market. I could certainly see this working out as investors gaining confidence in the system as whole since it seems much more likely now that no one company would be above getting punished by the government. Trust in the market is a huge key, and I think a tougher stance being taken by the SEC could lead to a much improved environment over the long haul.

Wall Street Journal reported that evidence mounts for strong recovery. The following is quoted from Wall Street Journal.

“There’s a growing risk that we’re underestimating the strength of the recovery,” said Stephen Stanley, chief economist at Pierpont Securities, noting that deep recessions tend to be followed by steeper recoveries. “If the economy pops, it’s going to be faster than anyone is forecasting.”

That’s pretty encouraging! The job market is still dull, but many companies can’t find qualified people to fill positions. If the recovery is really on the way, all prospective home buyers, especially in San Francisco bay area, will need to wait for long time before their dream of owning homes. Home prices are already creeping up and out of reach for many buyers. If the low interest rates are here to stay despite of strong recovery, we may witness another real estate bubble.

Today crude oil futures hit a new 17 month high, closing at $86.75. It has been a whirlwind for crude oil futures over the last couple of years. In the summer of 2008, oil prices traded as high as $147 a barrel and gasoline prices at the pump topped $4 per gallon. As the economy went into the tank in late 2008 and early 2009 the price of crude oil and gasoline dropped quickly. Crude oil futures plunged below $45 a barrel and gasoline went slightly below $2 per gallon. Fast forward to today, and crude oil prices have doubled from their low and gasoline prices are on the rise.

The writing is on the wall, gasoline prices are certainly going to cross $3 per gallon soon. The extra money you had in your budget because of the drop in gasoline prices is going to go away, and once again travel expenses are going to start causing many consumers headaches in the next few weeks and months. The biggest negative about this news is that summer driving season is coming soon, and prices are almost assured to be higher then, which will hurt vacation spending as well. It is all a vicious cycle that has the potential to slow down the economic rebound that appears to be underway.

As a wise consumer, I strongly suggest you start finding places to cut your expenses little by little to account for the higher costs of travel that are coming soon. Find areas of your budget that you can cut back ever so slightly to make a small differences. Those small differences will quickly add up to a significant amount over time. The sooner you start making changes in your spending habits, the better prepared you will be when these prices continue to rise in the months ahead. Preparation is a huge key to financial success, so start getting ready today!

The stock market is rising nicely today after the February non farm payrolls report showed that the economy lost just 36,000 jobs in February, much less than the 70,000 or so analysts had expected to be lost. Severe weather throughout February gave the month a very bad backdrop, especially for groups such as retailers and those most exposed to the consumer. The weather would also hurt construction hiring since many jobs were not able to be completed due to the inclement weather during the month. December’s number was revised to just 109,000 jobs lost, from an initial estimate of 150,000. In January there were 26,000 jobs lost. The unemployment rate held steady at 9.7%.

The breakdown of jobs gained or lost does indeed show the hardest hit area was construction, which shed 62,000 in the month of February. Unemployment in the construction is estimated at a stunning 27.1%. Retail employment held steady after gaining 40,000 jobs in January. On the encouraging side of things, 47,500 temporary workers were added in the month. Private business services, often seen as a barometer for the jobs market overall, added 51,000 jobs in the month of February.

Clearly the jobs market is on the mend from where it was several months ago. Right now we are talking about nearly break-even jobs gained and lost, which is a big improvement over 600,000 jobs being lost per month. There definitely needs to be more improvement and it will be interesting to see what the spring brings for the job market in the United States. Temporary workers being picked up tells me that employers are starting to edge back onto the side of hiring, but they are doing so cautiously. March’s employment report has a chance to be our first month of gains in quite some time, so stay tuned and see if the economy can get back on the path of creating jobs!

Mergers and acquisition activity, often called M&A, can be a great sign of the economic times. When the economy is in the dumps companies don’t want to open up their books and spend, so activity is slow. As companies become more confident about the economic environment they usually start to look for business opportunities that can help them grow. Both yesterday and today there has been a huge increase in the M&A activity on Wall Street, and there is no doubt that investors are taking notice.

Yesterday it was the Prudential and AIG deal that took center stage and for good reason. Prudential purchased the Asian operations of AIG for a whopping $35.5 billion. That certainly doesn’t sound like something that a company would do when they believe the global economy is in shambles. The simple fact that AIG was involved in this transaction also lifted the spirit of investors, since AIG is one of the main culprits for this financial crisis that has occurred in the past couple of years.

Today we have word that the fertilizer industry is ripe for M&A activity between major players. This is another space where companies with cash on hand appear willing to wheel and deal in an improved economic environment.

As individual investors the increase in mergers and acquisitions should definitely encourage you. Large companies that are stocked full of cash are often very careful with this cash, but when they start opening up their balance sheet and making deals, it is a true sign of increased optimism. If large companies with a stockpile of cash are more optimistic about the future of the economy then that makes me feel more confident about the direction we may be heading.

As more cash is spent and businesses take a leap of faith, the end result should be a positive one for the stock market and consumers as a whole!