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Unemployment Report: December 4, 2009

Posted by Larry Doyle on December 4, 2009 8:57 AM |

The widely anticipated December Unemployment Report covering the month of November was just released. Let’s dive right in and take a look at the numbers . . .

I. UNEMPLOYMENT RATE
August: 9.4%
September: 9.7%
October: 9.8%
November: 10.2%
– December Consensus Expectation: 10.2%
December Actual: 10.0% !!

>> LD’s comments:  Discouraged workers did increase and exit the labor pool. That fact supported this improvement. Initial reaction to the report remains one of disbelief and skepticism. The underemployment rate (U-6 rate) improved to an overall level of 17.2%.

II. NON-FARM PAYROLL (click here for definition of this term)
July: loss of 463k
August: loss of 304k
September: loss of 154k
October: loss of 219k
November: loss of 190k
– December Consensus Expectation:
loss of 100k to 125k
December Actual: loss of 11k!!

>> LD’s comments: positive revisions to the previous two months of 159k. A major surprise. Along with the positive revisions, do not be surprised to see many analysts tout this as the turn in the economy and the fact that government programs are working. We will need more than one month’s report to confirm that.

III. AVERAGE HOURLY EARNINGS
August: .3%
September:  .4%
October: .1%
November: .3%

– December Consensus Expectation: +.2%
December Actual: +.1%

>>LD’s comment: slightly less than expected. Won’t help consumer spending.

IV. AVERAGE HOURLY WORKWEEK
July: 33.0 hours
August: 33.1 hours
September: 33.1 hours
October: 33.0 hours
November: 33.0 hours
– December Consensus Expectation: 33.1 hours
December Actual: 33.2 hours

>> LD’s comments:  slightly better than expected. This number still rests near the low going back to 1964. Look for this to lengthen before we see appreciable improvement in hiring. We are not there yet.

V. FURTHER COLOR
What are the seasonal factors? How many jobs are being added back due to temporary hiring? This report is so far off the mark that it begs the question as to how the seasonal factors are weighed. Initial response from Bureau of Labor officials is that the seasonal factors had limited impact. Is that to be believed?

VI. MARKET REACTION

Pre-report at 8:15AM:
2yr Tsy: .72%
10yr Tsy: 3.37%
S&P 500 Futures: +1.5 @ 1099.50
DJIA Futures: +25 @ 10377
U. S. Dollar Index: 74.64

Post-report at 8:50AM:
2yr Tsy: .84%
10yr Tsy: 3.47%
S&P 500 Futures: +12 @ 1110
DJIA Futures: +105 @ 10457
U.S. Dollar Index: 75.03

While the knee jerk reaction is a sharp spike higher in both equities and interest rates, watch the dollar. If this report is to be believed, then the next question is when and how the Fed will react by withdrawing stimulus. That process should support the dollar. As the dollar strengthens, the equity and commodity markets may weaken.

Questions, comments, constructive criticisms always encouraged and appreciated.

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Thanks.

LD






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