Friday's jobs numbers were a very pleasant surprise and should have a lasting impact on equities.
Earlier today, the Department of Labor reported an unemployment rate of 10.0%, which was down from the 10.2% reached in October and below the Street's estimate of 10.2%. Also encouraging was that non-farm payroll employment decreased by only 11 thousand, a smaller decline than the Street's estimate, which had called for a 125 thousand drop. This non-farm payroll drop came as a great surprise since just two days ago the ADP non-farm jobs number showed a loss of 169 thousand jobs. This discrepancy will need to be looked at in further detail. Nonetheless, today's unemployment figures are very encouraging and bring a sigh of relief. (Click to enlarge)
Even when looking at the darker side of the story -- that is, including discouraged workers and those underemployed -- the number still looks to be improving. If we include in the unemployment rate calculation "Part time for economic reasons" of 9.2 million and "Marginally attached to the labor force" of 2.3 million, we calculate an unemployment rate of 17.2%, which also decreased from last month's figure of 17.5%.
Some of the industries that continued to experience job losses were construction (-27K), manufacturing (-41K) and information (-17K). Losses in these industries were offset by job gains in temporary help services (+52K) and health care (+21K).
Working hours also improved during November, with the average workweek for production and nonsupervisory workers on private nonfarm payrolls increasing by 0.2 hour to 33.2 hours. Moreover, the manufacturing workweek increased by 0.3 hours to 40.4 hours and factory overtime rose by 0.1 hour to 3.4 hours. While these changes are small, they are breaking a persistent down trend.
While the unemployment improvement is encouraging, we still cannot neglect the fact that the unemployment level is still very high (and the economy still lost jobs during the month), and this will likely continue to have an adverse effect on consumer spending.
The consumer continues to struggle, paying down debt and limiting purchases to essentials. As it stands, retail same-store-sales were generally down in November, and even this holiday shopping season is expected to be down one percent according to the National Retail Federation.