Rocky week ends with improved jobs report
SAN FRANCISCO (KGO) -- Friday evening, credit rating agency Standard and Poor's downgraded the U.S. credit rating from AAA to AA plus. It is the first such downgrade in U.S. history and it comes after an unpredictable day on Wall Street.
The Dow went on a rollercoaster ride and ended up 61 points up in the end and a better than expected jobs report helped. Unemployment dropped from 9.2 percent to 9.1 percent. Employers added 117,000 jobs in July.
Keep in mind, S&P is just one of three major bond-rating agencies; the other two, Moody's and Fitch, have not indicated what they might do. They still rate the U.S. at AAA. This adds pressure to a growing concern that fires are burning on several economic fronts and too many jobless Americans, 13.9 million, are putting us on the brink of a double-dip recession.
Following the nearly 513-point drop Thursday, the swings of Friday seemed to reflect a lot of uncertainty where the economy is headed.
The day started with a shred of positive news. There were 117,000 new jobs were added last month, shrinking the unemployment rate by one-tenth of a percent to 9.1. However, the day ended with growing concern the nation's credit rating would be lowered a notch from AAA. That would raise the cost to finance federal debt.
Officials tell ABC News ratings agencies are worried about more political turmoil ahead over spending cuts and raising taxes. However, financial adviser David Amann of Edward Jones in Redwood City points out past downgrades didn't trigger a crisis.
"Canada and Japan both had downgrades; Japan in the year 2000 and Canada in 1994. And after those downgrades, their markets did not respond very dramatically," said Amann.
Market turmoil over the past two weeks has been costly for the average investor. There has been $940 billion in stock value lost. The average 401k retirement fund has lost $12,000.
"There goes my 401k. That's really it. Look, it's uncomfortable, but you've got to stay focused on your long-term goals," said insurance salesperson Angel Deliz.
Economist Sylvia Allegretto, Ph.D., of U.C.'s Institute For Research on Labor And Employment believes the focus really needs to be on creating jobs to prevent the economy from slipping into a double-dip recession.
"I hope what this is going to signal is that we're finally going to get to the crux of the problem, which is to fix the job situation because we'll never get out of this mess unless we put people back to work," said Allegretto.
U.S. Treasury officials have already responded to the downgraded credit rating, telling S&P it made a math error in its analysis. That might give a clear indication the government fears a downgrade will raise its costs to finance debt, putting more peril in the U.S. economy.
economy, wall street, jobs, business, david louie
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