Jobs: We’ve Come a Long Way,
Baby—But We Need to See More
Monday, December 5th, 2011
By George Leong, B.Comm. for Profit Confidential
The November non-farm payrolls generated a total of 140,000 new jobs—not 200,000 and not 300,000. I’m not trying to be a pessimist, as we are lucky that the reading was not weak; otherwise the stock market rally could have tanked. However, the country needs to drive more jobs growth in order to drive a jobs recovery and get the economic recovery going.
Now, there are some who would argue that the unemployment rate plummeted to 8.6% from nine percent; but given that only 140,000 new jobs were created, the decline was a surprise to me. The Federal Reserve estimated that the unemployment rate would hold at nine percent in the fourth quarter and not decline to below this threshold level until 2012, so it’s a surprise.
The unemployment rate is at a two-and-a-half-year low, but my feeling is that there has likely been a large group of job seekers that left the employment market after failing to land a job and this helped to drive down the official unemployment rate. The unofficial unemployment rate is likely still at over nine percent or as high as 10%. It will be interesting to see what happens to the unemployment rate when these job seekers return.
I must admit that the jobs market is improving and much better off than in late 2009, when 15.7 Americans were looking for work and the unemployment rate was a whopping 10.2%. Today, there are still around 14 million Americans applying for about 2.9 million jobs. This is not a good ratio and underscores what I feel continues to be a deficient jobs market. The reality is that the unemployment rate likely declined because more workers left the workplace.
Pundits estimate that the country will need to create around 400,000 to 500,000 jobs monthly in order to drive down the unemployment rate to a healthy level. I simply do not see this happening over the immediate term given the global economic stalling.
President Obama and the Federal Reserve are trying. Obama introduced a $447-billion plan to drive job creation, but whether it will work or not is up in the air. It’s not going to be easy and everyone realizes this. The Fed has come out on numerous occasions and said that jobs will be an ongoing issue going forward, with the unemployment rate holding around nine percent and improving a bit into 2012.
Another issue will be the rising number of underemployed Americans, which are those taking work that is beneath their experience and education levels along with less hours than full time. The problem is that workers have little choice due to the fierce competition for the good full-time jobs with benefits and medical coverage. This means that more workers will have no medical benefits and will continue to sink deeper into debt.
So, before you get all giddy about jobs, take a deep breath and pause, as there need to be a lot more jobs created before related problems like housing market and confidence pick up.
I like small-caps, especially when the economy is recovering, as you can read in Small-caps Rally Out of Bear Market: Time to Look at Buying Some.
IPOs out of Chinadestined for the U.S.market continue to be dead in the water. Read about the issues in Chinese Reverse Merger Stocks Taking More Hits.
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Tags: bear market, economic recovery, federal reserve, job creation, jobs market, stock market rally, unemployment rate
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
