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One weak jobs number lifts hopes. Define knee-jerk

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Markets buoyed Today started out where yesterday left off, with an ugly mood in the markets. But you could feel the sigh of relief, and the change in the mood, with what arguably is a weak U.S. jobs report.

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The gain of 117,000 jobs in July, and a dip in the unemployment rate to 9.1 per cent, looks better because economists had forecast less, and because the falling jobless rate was due to people giving up hope and giving up their job search.

That's not to say there weren't some good signs, only that America remains in a jobs crisis, and it's going to take a lot to fix it. On the positive side, May and June numbers were revised up, and, in July, the private sector created 154,000 jobs, which is better than the average of the prior two months.

"Overall, not a bad report, but not great either," said senior economist Sal Guatieri of BMO Nesbitt Burns.

"It will help to allay double-dip fears, though markets will remain nervous until more convincing signs of recovery emerge. We still look for a near doubling in GDP growth in Q3 from the 1.3-per-cent pace in Q2. The report could take some pressure off the Fed to undertake another stimulus program at next week's meeting."

A sigh of relief, perhaps, but one wonders how short-lived that might be. And make no mistake, The Globe and Mail's Kevin Carmichael writes in Economy Lab, the U.S. labour market is weak.

"The employment to population rate, which is not affected by changes in the labour force, actually fell, from 58.2 per cent to a 28-year low of 58.1 per cent," said Paul Dales, senior U.S. economist at Capital Economics in Toronto.

"The bigger picture, then, is that two years after the recession ended the labour market has not really recovered at all, and may even have gone backwards. Even though immediate recession fears may fade a little on the back of this report, the key point is that the economy is still struggling and will continue to do so next year too."

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Before the jobs report, Asian markets had caught up with yesterday's bloodbath in North America, as Tokyo's benchmark Nikkei plunged 3.7 per cent and Hong Kong's Hang Seng 4.3 per cent.

European markets had also been down, but began to recover. U.S. markets also rallied, while oil gained, though the Toronto market sank.

As the Globe and Mail's Brian Milner, Rita Trichur, Richard Blackwell and Brenda Bouw report today, investors had begun to fear not only that the global recovery has run out of steam, but that there's little governments and central bankers can do about it.

Indeed, the debt crisis in the euro zone has run for well over a year now, and policy makers have failed repeatedly to get a grip on it amid divisions in the monetary union and what appears to be a policy vacuum. And while the European Central Bank held rates steady yesterday after raising them earlier, some observers warn its focus on inflation is only making matters worse.

The leaders of Germany, France and Spain were scheduled to talk today to discuss the market plunge.

"The ECB's fixation on inflation targeting has helped precipitate the very crisis they should be looking to avoid as investors see growth slowing and debt rising," said Mr. Hewson.

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"With Europe's leaders on holiday and no chance of the [bailout fund] getting the powers it needs in time to avert a meltdown, the ECB could well be forced into cutting rates and printing money to free up liquidity to prevent another freezing up in the credit markets."

Canada's jobs market slows Canada's labour market is slowing, creating just 7,100 new positions in July. And while the unemployment rate is now down to 7.2 per cent, its lowest since 2008, that's because some people have given up looking for work and have left the work force.

Gains in full-time jobs offset the losses in part-time employment. And, on an optimistic note, the private sector created 95,000 positions. However, the public sector lost 72,000 jobs, which mean private corporations are doing all the heavy lifting. And while many observers stress the gain in private sector work, the cutbacks in the public sector shouldn't be ignored, particularly for what they mean going forward in this era of austerity.

Canada's labour market has rebounded from the depths of the recession at a far faster pace than in other countries. In the past year alone, for example, some 252,000 jobs have been created. Still, the jobless rate is forecast to remain above the 7-per-cent mark for some time yet.

The private sector has now added more than 240,000 jobs in the past 12 months. That's a gain of 2.2 per cent, compared to a rise of just 0.9 per cent for the public sector.

Of concern, said Karen Cordes Woods and Derek Holt of Scotia Capital, is the slowdown in wage growth in July to just 1.4 per cent, which is negative after factoring in inflation.

"Forget small month-to-month changes in the jobs tally compared to 17.3 million employed individuals," they said.

"What matters is that on average, the Canadian worker isn't keeping his head above water as she pays more for basic staples like gasoline and groceries over time. That is a bearish guide for consumption just as it has been on disappointing consumption figures throughout 2011."

Magna profit slips Canada's Magna International Inc. posted a dip in second-quarter results, although it sales surged.

The continent's biggest auto parts producer earned $282-million (U.S.) or $1.15 a share in the quarter, compared to $294-million or $1.30 a year earlier. Sales, though, climbed almost 25 per cent to $7.3-billion.

Among other reasons, the parts giant cited higher input costs for its sliding profit.

"Operational inefficiencies and other costs, in particular at our exteriors and interiors systems business in Europe, higher commodity costs, new facility costs incurred to support our growth around the world, as well as the favourable settlement of certain commercial items during the second quarter of 2010 were the primary factors behind the decrease, more than offsetting the operating income earned on the increased sales in the second quarter of 2011 combined with the net positive impact from the unusual items in the second quarters of 2010 and 2011," it said.

Telus gains Telus Corp. today posted robust second-quarter results, boosting profit by more than 7 per cent as it benefited from stronger than expected smart phone growth, Globe and Mail telecom writer Iain Marlow reports.

The Vancouver-based wireless provider also raised its outlook on the positive results and boosted its dividend by 55 cents, providing investors with welcome relief after earlier earnings reported by Rogers Communications Inc. and BCE Inc. underwhelmed the Street.

Profit climbed to $324-million or 99 cents a share, from $302-million or 94 cents a year earlier. Revenue rose more than 6 per cent to $2.55-billion, as the company increased the amount of cash flowing in from customers using smart phone data plans.

TMX slips Its failed merger with London Stock Exchange Group PLC cost TMX Group Inc. dearly in the second quarter, helping push down profit because of the costs involved.

TMX said today it earned $54.7-million or 73 cents a share, down from $58.4 or 79 cents a year earlier. It chalked up almost $21-million in costs related to the merger, which fell apart after a group of Canadian banks, pension funds and others spoiled the party with a rival bid.

To hear chief executive Thomas Kloet tell it, you almost wouldn't know that a big merger collapsed:

"There have been many significant accomplishments on the operational and financial front to date this year. Among the successes in this past quarter was renewed momentum in our listings business. On a combined basis, new listings on Toronto Stock Exchange and TSX Venture Exchange were up 33 per cent and the value of new equity financings on TSX Venture Exchange increased 84 per cent compared with the second quarter of last year. We are also proud that Toronto Stock Exchange reached over 200 exchange traded products listed in June. We launched the world's first exchange traded fund over 20 years ago and remain a leading destination for innovative listed products worldwide. We continue to see strong growth in derivatives as volumes on the Montréal Exchange reached another new quarterly record with 16.3 million contracts traded."

In International Business today Is the commodities boom over? The fundamentals still look robust, but the economic outlook is deteriorating rapidly, particularly in developed countries. Javier Blas of The Financial Times reports.

In Economy Lab today The most recent issue of Journal of Economic Psychology contains an article by Menelaos Apostolou entitled "Why do men collect things? A case study of fossilized dinosaur eggs." Frances Woolley looks at why that matters.

From today's Report on Business

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