Unemployment, by the Numbers

The Labor Department announced today that the economy added 200,000 jobs in the final month of 2011, dropping the unemployment rate to 8.5% surpassing expectations. You'd figure that investors would warmly greet news that the job market is firming up, since continued joblessness is a key area holding back the country's recovery. However, the Dow Jones Industrial Average (INDEX: ^DJI  ) fell 0.45% on Friday.

The latest report continues a trend of falling unemployment after it tipped past 10% in 2009.

Source: Miseryindex.us.

So why did markets fall in the face of good unemployment news? One explanation might be that corporate earnings have decoupled from job growth. Earnings in recent years have been driven more from productivity gains with fewer workers. That could mean investors glean less meaning from month-to-month unemployment figures. Or it could just be that investors are pulling out money after a brisk start to the year.

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Fool.com graphics/photo/art editor Dari FitzGerald doesn't own shares of any companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 07, 2012, at 8:17 PM, seattle1115 wrote:

    Perhaps I'm too cynical by half, but I sometimes suspect that investors are happy about high unemployment - after all, cheap labor is good for the bottom line, is it not?

  • Report this Comment On January 11, 2012, at 6:54 PM, MHedgeFundTrader wrote:

    There is no doubt that the recent jobs data has been absolutely blistering. On January 4, weekly jobless claims plunged by 15,000 to 372,000, well below the 400,000 that is required for a sustainable recovery. The next day, the ADP report delivered a gob smacking 325,000 in job gains for December. Then the big kahuna surprised to the upside, the December non-farm payroll, reporting 200,000 new jobs, taking the unemployment rate to a three year low at 8.5%.

    Are happy days here again? Is it off to the races? More importantly, should we be adding risk positions here in expectation of a continued economic miracle?

    I think not. You all know well that I am a history buff. But I know enough about history to understand that it can be a dangerous thing. Don’t let these numbers lull you into a false sense of security. Any slavish reliance on the past can cause you to become history, if you’re not careful.

    There is no doubt that a seasonal surge in hiring caused by the holidays has created this spike. Normally, governments and agencies smooth these figures through a seasonal adjustment process. The problem arises when the structure of the economy is changing faster than can be reflected in these seasonal adjustments, as it is now.

    A large part of our economy is moving online more rapidly than most people realize. According to comScore, a marketing data research firm, online sales leapt by 15% to $35.3 billion during the November-December holiday period, an all-time high. I speak from a position of authority here as I happen to run one of the most successful financial sites on the Internet, which I kicked off four years ago with a $500 investment.

    Much of this migration is being captured by Fedex and UPS, the nexus at which Internet commerce meets the real world. After all, virtual products require a real world delivery. This explains why the couriers are seeing a booming business in an otherwise flat economy. Fedex hired 10,000 temporary workers to deal with the Christmas surge in 2011, a gain of 18% over the same period last year. UPS added a stunning 55,000, a 10% increase.

    Watch for the other shoe to drop. That will become apparent when that the newly hired become the newly fired, leading to a sudden and rapid deterioration of the jobs data. This could be the information the stock market and other risk assets need to put in a top for the year. The scary part is that this may happen sooner than you think.

    The Mad Hedge Fund Trader

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