And as Europe’s debt crisis threatens to spiral out of control, the Italian government said it will enact new measures to try to reduce budget deficits and make its labor market more efficient, steps meant to instill confidence among the global investors who have fled its debt. But there were still no guarantees that the actions will be enough to restore confidence in one of Europe’s biggest economies.
Wall Street had a seesaw day, as investors reacted to those and other pieces of news with wild swings — the Dow Jones industrial average soared up 171 points, then later was down 243 — reflecting the deep uncertainty that has gripped markets over the past two weeks. U.S. markets closed mixed: Standard & Poor’s 500-stock index closed down 0.1 percent; the Dow Jones industrial average up 0.5 percent.
In another worrisome sign, Standard & Poor’s, the credit rating firm, was considering a downgrade to the U.S. government’s AAA credit rating Friday night, according to news reports. Such a move could increase the cost for the U.S. government to borrow money and trigger ripple effects around the globe.
After the sell-off of nearly 5 percent in the S&P index on Thursday, two big fears have the world financial markets on edge: That the United States could fall back into recession, and that the European debt crisis could spread to the huge economies of Spain and Italy.
The first fear was eased Friday morning when the Labor Department said that U.S. employers added 117,000 jobs in July, more than double the revised 46,000 added jobs in June and better than the 85,000 net new jobs for July that were forecast. The unemployment rate ticked down to 9.1 percent, from 9.2 percent in June. The private sector did even better, adding 154,000 positions. But governments — particularly at the state and local level — slashed so many positions that this held back overall job growth. Minnesota’s government shutdown alone accounted for 23,000 lost jobs.
“Today’s employment report was a relief, given increasing market fears over the likelihood of a second recession,” said Neil Dutta, an economist at Bank of America-Merrill Lynch. “Contrary to recent opinion, the economy is not collapsing.”
“The July jobs report was not as bad as May and June,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “That’s about the best that we can say for it.”
Speaking at the Washington Navy Yard, President Obama acknowledged that “this has been a tumultuous year,” addressing this week’s plummeting markets. He noted that private job creation in July was the strongest since April, but added that the nation still needs to put millions of people back to work.