Jobless drops to 2 year low 8.6 percent.

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Today’s unemployment report indicated a jobless rate of 8.6 percent with 120,000 jobs added in the month of November. The previous numbers for September were revised from 103,000 to 158,000 last month and now revised again to 210,000. October figures of 80,000 were revised also to 100,000. These revisions by BLS makes these number look lot less plausible and manipulative in nature. We wont know the truth but constant revisions to the upside makes a case of shoddy estimates. Who knows how the November numbers will be treated in January ? It makes it harder to digest good or bad news.

The bottom line is we shouldn’t be reading too much into the tea leaves here with this November report for 120,000 which lowered the unemployment rate to 8.6 percent for the first time in 2 years. The unemployment rate has been stuck above 9.0 percent for the greater part of this administration. The BLS survey which calculates the unemployment rate showed 140.58 million were employed rose by 278,000 but the labor force contracted by 315,000. That means more people surveyed said they were working and yet more people exited the labor force or dropped out thereby skewing the unemployment rate down to 8.6 percent.

These kind of estimates are what makes these numbers non plausible and the stock market did not reacted with enthusiasm. The market reacted with a shallow rally that collapsed once these numbers came to light. The exuberance was short lived and less meaningless than on other occasions.

Most of these jobs added in November were in the retail sector 50,000 and professional and business services added another 33,000 and hospitality sector 20,000. Meanwhile the Government shed 20,000 jobs in the month of November out of which 5000 were laid off postal workers. The private sector keeps on adding jobs yet the Government is constantly shedding jobs and thereby lowering total number of jobs added to the economy.

Here is Bill Holstein author of “ Next American Economy” on his take on the unemployment numbers and what the US economy should be doing. He talks about being globally competitive by adding jobs in technology and other sectors.

What will the stock market do with these numbers? Its hard to speculate. With these non-horrible reports its most likely to rally to the upside for the remainder of the year. Unless some disturbing news comes from Europe the Santa Claus rally should be in place. The market has retraced most of its losses in its recent and sharp correction between November 14 and November 30 th and the Dow is above its 50 day and 200 day moving averages.

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