In a bit of shocker, The Bureau of Labor Statistics (BLS) reported this morning that December Nonfarm Payrolls increased a smaller than expected +103,000 versus the +150,000 expectation. Private payrolls only rose +113,000, a walloping 65,000 fewer than the 178,000 expected.
Even more surprising was the Unemployment Rate falling -0.4% to 9.4%. According to the BLS, the size of the workforce decreased by 260,000 which when combined with the +103,000 rise in payrolls, led to the drop in the unemployment rate. Although, all it means is that fewer people are looking for work, and they don’t show up on the reports. What grabs me the most is that the U6 unemployment rate, which is people working part time involuntarily and others marginally attached to the labor force, is still way too high at 16.7%.
Even though private payroll job growth has been positive in every month during 2011, and totaled +1.35 million, this rate of improvement is still far to slow to make a sizeable dent in the unemployment rate. The US economy lost almost 7 million jobs in 2008 and 2009 and it will take a lot more than a growth rate of +100,000 to +150,000 jobs per month to gain back these jobs.
Although these numbers are bad for the economy, they are good for the stock market. The weak employment report is further evidence that the Fed will undoubtedly continue its accommodative monetary policies throughout 2011. This is exactly what investors are hoping for, as it is reliant on continued government stimulus from Bernanke and the Federal reserve. A continuance of the current QE2, as well as a yet to be announced QE3 and QE4 are not only expected but necessary for a continuation of this bull market. Enjoy our Goldilocks economy.
Regards – Keith Springer