President Obama’s much ballyhooed jobs speech had no discernible effects on world markets or investor sentiment. Any potential impact was crushed by the bad news out of Greece and more generally in Europe, and rather than rejoicing at the President’s plans to turn the US economy around, European, US and Latin markets mostly fell two to four percent.The irrelevance of the President’s remarks to the global turmoil is particularly troubling because the President’s approach is essentially psychological. The main goals of the jobs legislation that President Obama proposed last night were to reassure employers and investors that the government is getting serious, to entice consumers to resume spending, and to show the antsy Democratic base that he can still make an aggressive case for stimulus spending.The apparent irrelevance of his speech to world markets doesn’t help on any of these fronts. As the FT notes:
Another factor depressing sentiment is the lukewarm reaction afforded US President Barack Obama’s $450bn jobs creation plan, delivered late on Thursday. A lack of detail and early evidence that the Republican caucus will be obstructive appear to be of concern to many traders…. All this came on the day that the latest weekly initial jobless claims numbers showed the US labour market is still struggling for traction – an issue encapsulating investors’ recent wariness over the outlook for global growth.
For now, the markets are responding to the President’s proposals as just more mush from the wimp. The speech aimed too low — and it missed.