The quality of job creation has also been another very serious concern. While unemployment has happily fallen from a peak of 10% to a more “manageable” 7.4% in July, the majority of all job creation since the start of the year — 77%, to be exact – is part-time in nature. Of the 953,000 jobs created, just 222,000 are full-time, according to the St. Louis Federal Reserve. Businesses have been willing to refinance their debt, but cost-cutting and ongoing skepticism haven’t led to many full-time positions. Tack on the imminent enactment of the Patient Protection and Affordable Care Act in January 2015, and you have all the more reason for businesses to sidestep hiring people on a full-time basis.
It’s affecting big business
Combining these factors together creates a picture where consumers may feed off this negativity and spend less despite a market that keeps running higher. Wal-Mart Stores, Inc. (NYSE:WMT), the largest employer in the U.S. at 2.2 million people, earlier this week reported a surprising 0.3% decline in second-quarter same-store sales and lowered its full-year profit and sales forecast. Last quarter, Wal-Mart Stores, Inc. (NYSE:WMT) was given a bit of a pass because delayed tax refunds and the immediate shock of the end of the payroll tax holiday were still working their way down the chain, but this quarter truly exposed what could be a very scared consumer who isn’t nearly as confident in the economy or the government as we’d like to think.
But it isn’t just retailers that are exhibiting these disturbing signs. Cisco Systems, Inc. (NASDAQ:CSCO), just hours before Wal-Mart Stores, Inc. (NYSE:WMT), reported second-quarter results that showed signs of slowing revenue growth and delivered third-quarter guidance that handily missed the mark. Furthermore, Cisco Systems, Inc. (NASDAQ:CSCO) announced a second round of job cuts, this time 4,000 jobs, or 5% of its workforce. The quandary here, to summarize fellow Fool Rick Munarriz: How can Cisco Systems, Inc. (NASDAQ:CSCO) expand production if it’s shedding workers?
The concern here is that if consumers are losing faith in Congress and in President Obama, how can we expect them to continue to spend? To add, how can we expect these same people who are running America’s small and large business to expand their workforce when deep down the majority appear to be losing confidence in the U.S. economy? The answer, I believe, is that we can’t count on consumers to go against their gut, and that, ultimately, seems like a viable reason the markets appear long overdue for a pullback.
The article Is President Obama Creating a Crisis of Confidence in the Markets? originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends Cisco Systems.
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