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Stock market volatility: Dow jumps on jobs report, plunges, then rises again

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Despite the glum financial markets, some economists said the job gains were at least a brighter light for the economy. According to the Department of Labor, the nation added 117,000 jobs last month. The government also revised slightly upward the job gains for May and June.

The relatively modest increase in jobs, however, indicated that the economy is growing slowly.

At the same time as the economy added jobs, the unemployment rate in July dropped to 9.1 percent from 9.2 percent in June. But, the main reason for the slight drop was a reduction in the number of people who say they are looking for work. “It highlights how soft the job market remains,” says Mr. Zandi.

The better-than-expected jobs numbers gave Zandi hope that the US economy would dodge a recession next year.

“The overarching message is that we will skirt a recession,” he says, “unless we get nailed by something off our radar screen.”

However, some other economists think it might be too early to rule out an economic downturn. One of those is Nigel Gault, chief economist at IHS Global Insight in Lexington, Mass. who raised his probability of a recession from 33 percent to 40 percent on Friday.

“The economy is running pretty close to stall speed,” he explains. “When you are that weak, you run the risk of a downward spiral of confidence and activity. It does not take much of a shock to go from stall speed to outright recession.”

Although Mr. Gault says it was a relief to get a better jobs report in July, he thinks the August numbers are likely to be worse since they will reflect the uncertainty that built up during the debate over raising the debt ceiling.

“I would be surprised if we sustain the uptrend,” says Gault.

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