Uncertainty — the bane of investors, businesses and consumers alike — is showing up in the labor market, the Greek financial crisis and the Iranian nuclear talks and it could prove to be the watchword of the summer.
After the Labor Department’s disappointing June jobs report late last week, economy watchers were far less certain that the U.S. economy is heating at a sufficiently rapid rate to prod the Federal Reserve to increase interest rates when it next meets in September.
During the weekend, U.S. Secretary of State John Kerry sounded a note of caution on a different topic — the ongoing effort by six world powers to get a nuclear deal with Iran. And after voters in Greece sharply rejected the EU’s latest bailout plan, the world was left with what the New York Times called the “billion-euro question”: Where do the beleaguered country and the European Union go next?
On Monday, France and Germany pressed Greece for new proposals in its bid for financial assistance. Reuters reported that the European Central Bank decided to keep a tight grip on funding to Greek banks, which have been closed for more than a week.
Investors detest uncertainty, and there is even more of it than there appeared to be a week ago, although U.S. financial markets seemed to be weathering the recent troubles fairly well.
By the close of trading on Monday, major U.S. market indexes were lower, but not as sharply as they had been earlier in the day. The Dow Jones industrial average lost 0.25 percent, the S&P 500 fell 0.38 percent and the Nasdaq Composite Index dropped 0.34 percent.
Analyzing the potential global financial fallout from the Greek crisis, the New York Times reported that most international banks and foreign investors sold Greek bonds and other holdings since the debt crunch began in 2010 and aren’t at risk from what the Greek government decides to do.
Worries that Greece’s ills could infect the rest of the world have faded in some quarters because Europe has enacted safeguards against them. If Greece leaves the EU, the eurozone might be better off without it, some say. Others aren’t so sure, arguing that no country has ever left the EU and there are no provisions for such an exit.
In the United States, the latest unemployment report saw job growth slow in June and revealed that 432,000 people left the labor force. The economy created 223,000 jobs during the month, but the May report was revised downward to 254,000 jobs from the originally reported 280,000. Average hourly earnings were unchanged.
"While we've been seeing positive signs of the economy picking up moving into the second half, this report certainly isn't pushing the Fed to accelerate the liftoff timeline," Ted Wieseman, an economist at Morgan Stanley in New York, told Reuters.