The U.S. Labor Department reported on Friday that the U.S. economy added 120,000 jobs in November, roughly in line with expectations. The economy has now produced 100,000 or more jobs five months in a row – the first time that has happened since April 2006. But to make sense of jobs data, it’s important to understand the differences between the two main data sets, both of which can be “noisy” and subject to some pretty substantial revisions and adjustment factors. The number of jobs created or lost is revealed by the nonfarm payroll report, which is a survey of employers.
The unemployment rate fell to 8.6 percent (or 13.3 million Americans) in November from 9 percent the prior month and is at the lowest level since March of 2009. The unemployment rate comes from the Bureau of Labor Statistics’ Household Survey, which has published significantly more positive readings this fall, more optimistic than payrolls report over the last three months. Interestingly, the two data sets also diverged during the summer, but in the opposite direction with payrolls showing a brighter picture. Eventually, we can likely expect the two surveys to come closer together over longer time intervals, giving us a more consistent picture of the U.S. labor market.
What does this mean for you? One statistic I find encouraging from the Household Survey is that the number of long-term unemployed (more than six months) appears to have peaked. By no means are we out of the woods yet on jobs, but I think the U.S. economic data — whether it’s consumer confidence, manufacturing, corporate earnings, or retail sales — is trending in the right direction. U.S. stock market valuations appear pretty reasonable, even cheap by some measures. American business has demonstrated it can capture consistent profits with even modest 2 percent economic growth.
Risks to 2012 growth include some form of European crack-up (although exports to the Eurozone only represent a little more than 1 percent of the U.S. total), the pending expiration of the Bush tax cuts, and whether Congress decides to extend the Social Security tax cut and long-term unemployment benefits. But for now, markets can breathe a sigh of relief that the November jobs report do not look like they will not derail a Santa Claus rally!
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