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Another Brick in the Wall

Story Highlights:
  • Friday’s employment report showed a net jobs gain in November, but more losses in December.
  • Don’t fret a wobble—the losses’ magnitude wasn’t huge, and we’re still seeing steady long-term improvement.
  • Expect to see more “bad” news ahead. It’s a wall of worry feature, and stocks should still climb


The first Friday of the new decade opened with some not-so great news—December saw an unexpected increase in job losses. Less noted, however, were November’s figures showing a net jobs gain. Instead of cheering that rather unexpected good news, headlines favored the December loss. C’est la vie.
Given the emotional rollercoaster investors have ridden since 2008, we see why folks find optimism fleeting, and unemployment especially hits home. Yet as investors, how news makes us feel is far less important than what it means for stocks. So while it’s understandably easy to seize on any piece of bad news, markets staged a late-day rally Friday to prove it, for one, could care less about the latest job report.
As bull markets roll on, it’s quite normal to see indifferent or even good news couched as bad. Job losses actually eased throughout 2009, and December’s 85,000 net job losses was the second best monthly figure last year. Just a few months ago, an 85,000 monthly loss would’ve been seen as a huge improvement. But because it followed November’s net gain of 4,000, it’s painted as sad news. (Note: The market wasn’t fooled.) Also, the shift’s magnitude—89,000—is hardly noteworthy and far less than June’s 145,000 increase over May, which didn’t prevent stocks from rising from there to finish the year strongly.
Recoveries never move in a straight line. We’ve said here before employment data will likely go through fits and starts. While longer-term improvement probably isn’t too far off, it wouldn’t be unusual to see unemployment stagnate or even increase a bit.

And don’t forget to think globally—employment around the world is a mixed bag, exactly as we’d expect on the heels of a big, global recession. Take Europe: Germany’s improving while Spain’s lagging, yet aggregate euro zone unemployment is only flat to slightly higher. No big, bad changes, just another brick in the wall of worry. And just about everywhere, productivity is skyrocketing—all positive for future revenue growth.
Expect to see more such news treatment in 2010 (and beyond), with good news dressed as bad. Perhaps the employment recovery will be “too slow,” or they’ll be “the wrong jobs,” or the numbers won’t be “right.” (Funny how employment data are always widely seen as flawed when improving, but rock-solid truth when they’re falling.) This is how the wall of worry is built, and though stocks’ climb won’t always be smooth, climb it they will.

Disclosure: This article reflects personal viewpoints of the author and is not a description of advisory services by its author’s employer or performance of its clients. Such viewpoints may change at any time without notice. Nothing herein constitutes investment advice or a recommendation to buy or sell any security or that any security, portfolio, transaction or strategy is suitable for any specific person. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.