Employment Report November 2009

Decidedly Good News...

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(Tickers: NYSE: RHI, MAN, KFY, MWW, DIA, SPY, NYX, DOG, SDS, QLD, Nasdaq: QQQQ)

Critics of the President will be hard pressed this morning to find a point of argument on the labor front. November's Employment Situation Report offered decidedly good news. In our "Week Ahead" copy, we said this report should offer investors reason to buy or sell stocks for some time to come. However, while the near-term benefit for stocks is real, and this indicator is decidedly positive, we remain wary of late December/early January share ownership. We will outline the reason why in a near-term piece. For now, if you are looking for reason to be bearish post today's flurry, see Technical Analyst Steven Ferguson's last two articles found via this link.

Employment Report

Unemployment Rate

October's unemployment rate jumped into double-digits, reaching 10.2% and spurring harsh criticism of a president who inherited an economy on the downslide. Every dog has his day, but today the raving maniacs of political mind and of elephant bent would best stay silent. November's unemployment rate improved to 10%, giving Democrats at least a month to bask in the potential for economic recovery. Economists surveyed by Bloomberg had been looking for an ongoing 10.2% unemployment rate for November, so the market found itself a positive surprise.

Nonfarm Payrolls

This data was simply fantastic, at least on the surface. Nonfarm Payrolls showed a net shedding of only 11,000 jobs in November, versus the economists' consensus forecast for -100K. The improved rate of decline compared against October's revised rate of -111,000 (improved from -190K). The data also matched well against a prior three-month average rate of loss of 135K. Thus, the market found further reason to celebrate this morning.

Continued losses in Manufacturing (-41K) and Construction (-27K) were offset by enthusing gains in important first-mover areas. Temporary Employment, where businesses first look for new help, improved by 52K. Since September, improving "temporary help" demand has led to the net hiring of 117K Americans. This news perhaps offers a starting point for consideration of the shares of employment firms Robert Half (NYSE: RHI), Korn Ferry Int'l (NYSE: KFY), Manpower (NYSE: MAN) and Monster World Wide (NYSE: MWW). Professional and Business Services, within which Temporary Employment is categorized, improved by 86K.

More good news...

We also found reason for cheer within the bad news bits. While Manufacturing and Construction continued to shed jobs, they did so at a significantly slower pace than seen through the first six months of the year.

The Average Workweek improved to 33.2 hours, up from 33.0. As this metric rises, demand for new jobs should be exponentially spurred. We say this due to our view that panic led layoffs to excessive rates versus historical recessionary firings. Thus, employers should find themselves short of help on very little demand increase.

Under-Employment

We typically like to look at the UnderEmployment Rate as well here. Those working part-time jobs who would prefer working full-time, or had to take part-time work due to the loss of full-time jobs or hours cut, stayed steady at about 9.2 million. As demand for part-time work rises, pressure increases on the poorest of Americans. This is because many of these folks only qualify for part-time work, and now have a more difficult time finding jobs that fit their skillset.

The government also breaks out those who have been unemployed for a long period into two categories, but does not include them in the unemployment rate. We know better though... If we include the "Marginally Attached" workforce in the unemployment count, UnderEmployment sits at 16.3%. Marginally Attached workers are those who have not sought a job in the past four weeks. Discouraged workers are those who believe they simply cannot find work now.

UnderEmployment clearly impacts consumer spending, but we suspect that as employment improves, spending would see a burst of activity. We will dedicate a future article to our theory on why we believe this is so; it's based on psychological factors but we suspect supported by empirical data.

If you need a job quick, you might consider our friend, Robert Burton's new helpful read, "7 Days to Your Next Job."


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