Weak jobs report and jittery nerves send markets down.Stocks fell on Friday, after US Labor Department’s monthly employment report for August showed a drop of 4,000 jobs for the first time in four years.Experts were expecting an increase in employment of over 100,000. The drop in employment was a surprise to the investors. Investors, already jittery from the bad loans, credit crunch, and home price drop could not see a positive direction for the markets.S&P500 dropped 20 points, Dow dropped 245 points and NASDAQ dropped 31 points for the week ending September 7th, 2007.
Employment report can help to determine how well the economy is holding up under the current credit crisis, declining housing market, and liquidity concerns that we have talked about in the last few weeks.Employment is important, because, without jobs people do not know when they will find their next job.If people do not have jobs, they don't want to spend money and buy goods.When people do not buy goods, then businesses cannot sell what they make.Businesses soon start to reduce the number of people they need.Soon unemployment starts to increase.This starts the cycle that is not good for the people and the economy.
This week’s employment report sends a strong message to the Federal Reserve Bank Chairman Ben Bernanke that the economy could be running into trouble.He should consider cutting the interest rates in September, to help the economy and credit crisis.Let us wait and see if the Federal Bank does change the interest rate in September.
“iApology for iPhone”
You stand in long lines to buy your first $599 iPhone.A few weeks later you find out that the price of iPhone is dropped to $399.Do you feel angry or frustrated? You are not alone.
Steve Jobs, the CEO of Apple, responded to a flood of e-mails complaining about the surprise price drop, by first apologizing and then giving $100 store credit to all who paid the original $599 price.Who says it does not pay to make your voice heard?
What is stronger or weaker foreign currency?
We have been talking about foreign exchange in the past few volumes.In continuation, let us consider what is the meaning of stronger or weaker currency?Suppose you hear today in the business news that “Dollar was weak against the British pound today.”It means that today (in comparison to the exchange rate earlier) dollar became cheaper to buy in British pounds.In other words, for each British pound, you would get, in exchange, more dollars.Alternately, for each dollar, you will get less British pounds.Dollar become weak against the British pound is the same as British pound becoming stronger against the dollar.
In this example, when dollar became weak, in the short run British people will find it cheaper to buy things in US, because for each British pound they have, they now can exchange them for more dollars.For example, the exchange rate yesterday was 1 British pound (£) = $2.00.Today, when the dollar became weak, let us say the exchange rate became 1 British pound (£) = $2.10.Suppose your friend who lives in
London wants to visit you and finds that it cost $600 for an airplane ticket between Britain and US.The cost of the ticket, in British pounds, at yesterday’s exchange rate was 300 British pounds, and at today’s exchange rate it is 285.70 British pounds, or more than 14 British pounds cheaper.
What affect this will have on the number of people traveling from Britain to US?What will happen to the number of people traveling from US to Britain?We will discuss these questions in the next issue.
Learn more about what is Credit History? Why is it important to have a good credit history? Volume 12.
Learn more about what is Currency? What is Foreign Currency Exchange rate? Volume 14.
Learn more about what is Economy, Business, Workers, Goods, Services, Stock, DOW, S&P500, and NASDAQ in Volume 16.
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