Opinion – Marcos de Vasconcellos: It’s ugly to say, but the market wanted more unemployment

There is a consensus in the financial market: forecasts are there to humiliate economists, analysts, politicians and, if all goes well, journalists. Even so, it was still impressive when, on the 5th, the main banks and analysis houses were 100% wrong in their expectations for job creation in the United States.

The market was betting that around 250,000 jobs would be created in the US in July. They were taken by the reality of 528 thousand new jobs, announced by the Federal Reserve (Fed, the North American central bank), in the report called payroll.

It sounds — and is — good news! More jobs. More families with the opportunity to feed themselves, pay the bills, live better. But the financial market shuddered.

It turns out that payroll is a great thermometer for the economy. If there are more jobs, there will be more money circulating, more purchases, and therefore more inflation. And what is the reason for the recent rate hikes by central banks? Reduce the circulation of money, purchases and inflation.

Global banks, such as Morgan Stanley, Goldman Sachs and Citi, pointed out that the rise in jobs reinforced the need to raise interest rates further, to cool (or cool down, as they say) the economy. And the higher the interest, the worse for the stock market.

The truth is that, I say without judgment, the main players in the investment world were rooting for more unemployment. Full employment makes it difficult to control inflation.

Almost a week after losing their breath with rising jobs, investors breathed a sigh of relief, seeing US inflation indicators stabilize.

The consumer price index (CPI) came out better than expected by the market, remaining stable in July. And the US Producer Price Index (PPI) dropped 0.5% — the market expected a more subtle drop of 0.2%.

The data soothed investors, but San Francisco Fed Chair Mary Daly said it was too early to “declare victory” against inflation.

Here, at the same time that the market had the impression of controlled inflation in the US, our Stock Exchange interrupted its beautiful sequence of highs. Analysts justified the brake on profit taking, that is: the sale of part of the shares that made money.

General insecurity, including the fact that we are on the eve of our presidential election, has led managers to bet on short shots.

Speaking of elections, Minister Paulo Guedes guarantees that unemployment here will drop to 8% by the end of the year. Today, the index is at 9.3%.

As most analysts see that we are already close to our maximum interest rate, a fall in unemployment, unlike what happened in the US, should not have a strong impact. That’s if, and only if, the predictions match reality, of course.