Job creation in November disappoints, but…

Expect a big stock market down draft today.

November’s non-farm payrolls (i.e. job creation) figures are in and the U.S. economy created 39,000 jobs.  This compares to a consensus expectation from economists of 144,000 jobs created.  Meanwhile, October’s job creation figures were revised upward to 172,000 jobs from the earlier reported 151,000.

Meanwhile, the unemployment rose to 9.8% from its previous level of 9.6%.

Analysis: Expect investors today to overwhelmingly focus on the “big” miss in jobs for November.  Clearly, as an investor you would like to see big job creation to move the U.S. unemployment rate in the downward direction.  However, the economy still did net, create jobs.  Additionally, each of the previous several months have seen upward revisions to their figures, regardless of the data survey.  So what I am saying is that expect these November numbers to be revised upward, too.

So if the economy created jobs, then why did the unemployment rate go up?  There can be many sources for this counter-intuitive result.  However, as I have written about on the blog before, the U.S. economy has new entrants into the economy every month just from population growth.  Specifically, I have said that the unemployment rate in the U.S. is likely to remain stubbornly high because of the preceding fact.  But also, the unemployment rate only counts those who are looking for work.  If you get frustrated looking for a job and stop altogether then you aren’t counted.  But…

This last point may be the source of a silver-lining in today’s “disappointment.”  What I am saying is that folks are gaining more confidence in their ability to finally find a job, that they may be re-entering the job finding fray.  This is something I identified as a stage in the recovery from the Great Recession about a year and a half ago.  And we may be seeing this phenomenon kick in finally.  If so, then today’s low job creation figures may be the first signs of a true recovery in the unemployment situation.  To tell for sure will require more monitoring on my part.

In the meantime, the stock markets are stuck at about the same point as they have been since late April and early May.  Each time there is good news they will rise a little.  But then when there is bad news they will fall a little.  So here we sit.  In calculus terms, the first derivative is a fixed number.  However, the second derivative, momentum/acceleration, has to be considered positive.  That is, the U.S. economy is doing better.  More sectors of the economy have stabilized and are actually growing, albeit slowly.  Eventually that will lead to actual job creation and a reduction in the unemployment rate.  Thus, if you are an equity-type investor, I would buy on weakness in the stock market.

Importance grade:10; by now this is beyond redundant.  [Perhaps I will coin a new word here.]  The jobless situation in the U.S. merits a 10 in importance because our sense of collective recovery will only be positive when jobs return to the economy.  This point of mine is absurdundant.

Jason