Its All About the Jobs

"Its a recession when your neighbor losses his job; its a depression when you lose your own."- Harry S. Truman

Today the market is recovering some of its previous week's losses on the back of some heady employment numbers.  The headline unemployment number fell to 5.9% finally breaking the 6% barrier and the underemployed number fell to just below 12%.  Both of these numbers are encouraging as more people employed means more wages and therefore more spending power for the demographic that makes up roughly 70% of United States GDP.

Increased employment numbers however do not necessarily lead to more consumer spending.  If the hours worked per employee fall or if wage rates fall then this can offset the growth in labor but fortunately both of these metrics improved.  Average number of hours worked per week increased to 34.6 from 34.5 and aggregate earnings increased 0.5%.  These are hardly numbers to get too excited about but at least it does point to increased consumer spending in the coming months.

The only fly in the ointment (and it is quite a big one) was that of the 236,000 jobs gained in the private sector 97,000 came from a decline in the labor force.  What this means is that more people gave up looking for work and non of the discouraged workers (those who have given up looking) came back into the labor force.  Had this number remained the same the unemployment number would not have moved.

So once again while the market celebrates the gains in unemployment the underlying current is continued slow growth.  Fortunately the United States is growing (unlike Europe) but I doubt that these numbers will affect the Federal Reserve's policies and I would be surprised to see any movement in interest rates in the near term, something that the stock market may continue to celebrate for the rest of the year.