U.S. Unemployment and Europe's Bailout Let the Market Breathe This Week

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U.S. unemployment, European bailoutAfter what seems like an eternity in the doldrums, the stock market came to life this week as investors bet that the economy wouldn't be as bad as had been priced in. After falling on Monday, the Dow Jones Industrial Average (INDEX: ^DJI) posted a big gain over the next four days.

This week, the ISM Index, a gauge of manufacturing activity, rose more than expected. Construction spending grew, as opposed to contracting, as analysts expected. And Europe started to get its act together on a massive bailout fund.

But as usual, it all starts with unemployment.

It's All About Jobs

The biggest report of the week came out Friday morning, when the Labor Department announced nonfarm payrolls for September.

Overall payrolls rose by 103,000, higher than the 60,000-worker gain economists were expecting. The private sector pulled more than its fair share, adding 137,000 jobs as government workers continue to take the brunt of budget crunches around the country.

The Labor Department also revised July and August payroll numbers up a total of 99,000.
This continues a trend of OK but not great economic data in the U.S. as we teeter on the brink of another possible recession. With unemployment stuck at 9.1% it's going to be hard to see a meaningful improvement in the economy until more workers begin working.

Right now, it's as if 90% of the economy is rolling along like a well-oiled machine while 10% is left in the dust. This isn't unusual in the wake of a recession driven by debt and a banking collapse, but it won't feel like a real recovery until more of the economy is included.

Oil Is On a Comeback

Earlier this week, I talked about how Europe's bailout plans and unemployment would rule the week on the market. Well, the news out of Europe midweek was positive and oil was the biggest beneficiary of the market's sigh of relief.

Oil bottomed at $75 Tuesday, but climbed as high as $84 today, driving many energy stocks higher. On the S&P 500, three of the biggest winners were Marathon Petroleum (MPC), Tesoro (TSO), and National Oilwell Varco (NOV), all of which saw their share prices climb at least 12% over the past week.

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This week's recovery in the stock market and oil prices doesn't mean Europe is out of the woods, but we may be seeing a light at the end of the tunnel. Slovakia and Malta are the only holdouts keeping the bailout from moving forward, and there's hope that they could vote on ratifying an agreement next week.

Then we move on to a possible orderly default in Greece, which will probably drive the market for the next six months.

Singing the Tech Blues

While oil was screaming higher on hope the economy would recover, concern that PC spending will be weaker than expected sent semiconductor companies south this week.

Research company Gartner said semiconductor sales would fall 0.1% this year, reversing from a previous estimate of 5.1% growth. That helped send shares of Micron Technology (MU) and Advanced Micro Devices (AMD) lower this week.

Loss of a Legend

In reviewing the macroeconomic events of the week, I would be remiss if I didn't mention the loss of Steve Jobs, a worldwide business icon. He built not one, but two businesses into multibillion-dollar empires -- Apple (AAPL) and Pixar -- and revolutionized the computer, the phone, and the music industry, just to name a few.

Jobs was just one man, but he had a greater impact on business and our economy than anyone else in my lifetime. He will be missed.

A Good Week, but Not Great

Depending on your preferred perspective, you could see positives or negatives in the economic data this week. It isn't like we're blowing the economic indicators out of the water, but we aren't in a tailspin, either.

Improving factory activity and a steady gain in jobs are some much-needed positive news heading into earnings season. Next week, we'll find out what all of this economic data means for businesses when they begin reporting earnings.

Motley Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool. The Motley Fool owns shares of Apple and National Oilwell Varco. Motley Fool newsletter services have recommended buying shares of Apple and National Oilwell Varco, as well as creating a bull call spread position in Apple.

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