Oil rockets up on no good news

This chart does not directly track the price of petroleum, but is the chart for an oil ETF called US Oil, symbol USO, that is structured so its share price should reflect, at 1:1 ratio, the movement of petroleum prices. So USO's symbol is an excellent proxy for oil prices.

So why the jump today? The WaPo:

Prices jumped after the government said U.S. employers added 163,000 jobs in July. Last month’s hiring was the best since February, though it wasn’t enough to drive down the unemployment rate.

Prices for oil and gasoline tend to rise on signs of strength in the economy, which increases energy demand.

Except that by the end of the trading day, oil traders will start responding to that critical clause of the story: "... it wasn’t enough to drive down the unemployment rate."

In fact, even though hiring was up in July it was not enough to offset losses, so the unemployment rate actually went up from 8.2 to 8.3 percent.

(Reuters) - U.S. employers in July hired the most workers in five months, but an increase in the jobless rate to 8.3 percent could keep prospects of further monetary stimulus from the Federal Reserve on the table.

Nonfarm payrolls rose 163,000 last month, the Labor Department said on Friday, snapping three straight months of job gains below 100,000 and offering hope for the ailing economy.

But the unemployment rate rose from 8.2 percent in June, even as more people gave up the search for work and a survey of households showed a drop in employment.

There are again today rumors of a new "stimulus" forthcoming from the Fed because of the uptick, and if the Fed does announce one, oil prices will jump again. But we have been through numerous such rumors this year and none have come to pass. My prediction: there won't be one this time, either.

Why? Number one reason: It would hurt Campaigner in Chief Obama for the simple reason that the stimuli his administration has sponsored so far have done no good. And neither will another one (a third "Quantitative Easing" as the Fed calls them, the next one would be QE3). So he'll lean on Fed Chairman Ben Bernanke to refrain.

Second reason: Bernanke isn't inclined to announce one anyway, since he'll focus on the increased hiring figure rather than the uptick in unemployment. Besides, the head of the European Central Bank just last week said no to its own stimulus, and Bernanke will not break from them.

But overall, the economies in both the US and Europe are weak and weakening, not strengthening. There will be upspikes in oil prices as the market grabs onto faint glimmers of hope now and then, but the longer-term trend for oil prices is down.

Update: And here is the main reason why the downward pressures are enduring and upward pressures are short term: "July jobs report: America’s labor market depression continues."

In the household survey, which produces the unemployment rate, both the employment-to-population ratio and the labor force participation rate dropped, not signs of a healthy labor market. The report will alleviate fears that the US might be tipping back into recession. But uncertainties over the strength of global growth, the Eurozone crisis, the fiscal cliff and the November elections are giving plenty of reasons for caution. We expect subdued monthly job creation in the 100,000-150,000 region in the second half of the year.

"Context: During the first three years of the Reagan Recovery, job growth averaged 273,000 a month for a total of 9.8 million. If you adjust for the larger U.S. population today, the Reagan Recovery averaged 360,000 jobs a month for a three-year total of 13 million jobs."