11/6/2009

Today's release of the pivotal government 'jobs report' (the nonfarm payrolls data for October) was followed by further bullish action on the major indexes. Stocks rose on the news that US unemployment had surged to its highest level since 1982, coming in at 10.2%, well above the 9.9% unemployment rate economists had been expecting. According to some analysts, the market perceived this news as bullish because the rate of change at which additional job losses are occurring is now slowing. Non-farm payrolls declined by 190,000 last month (exceeding the consensus estimate of 175,000) and thereby continued their recent trend where each monthly decline is somewhat smaller than the previous. However, other data released today underscores just how weak the US labor market remains: For instance, the average number of hours worked per week is at its lowest level since 1964; the average length of time that the officially unemployed are out of work has now risen to 26.9 weeks (up significantly from 22.5 weeks in May of 2009); unemployment among teenagers in the workforce is now above 25%.

A further reasons for today's market upswing is investors' perception that with unemployment numbers still so high, the Federal Reserve is unlikely to raise rates anytime soon, thereby continuing the trend of supplying 'cheap money' that can find its way into the market. Today's unemployment numbers perhaps explain why the Fed adopted such a dovish stance in its policy statement on Wednesday, where it had kept interest rates unchanged. The Fed spoke of maintaining 'exceptionally low levels of the federal funds rate for an extended period.' It appears that the Fed will now remain on hold until at least late 2010.

Faced with a weak labor market, new government efforts to end - or at least stem - job losses have recently been announced. Yesterday, Congress voted overwhelmingly to extend unemployment benefits by up to 20 weeks. Today, President Barack Obama signed a new economic stimulus bill totaling $24 million into law that will give prospective homebuyers tax incentives, provides additional jobless benefits, and allows business tax cuts. Obama was quoted as saying that 'The need for such a measure was made clear by the jobs report that we received this morning.... sobering number that underscores the economic challenges that lie ahead'. He promised that 'I will not rest until all Americans who want work can find work.'

In other top news today, a brokerage upgrade of General Electric boosted the Dow and the industrial sectors. GE's stocks surged more than 6% after being upgraded to 'outperform' based on the belief it would make some major divestitures over the next few years. Also boosting the Dow was a Goldman Sachs upgrade of Dow component Travelers (to 'buy' from 'neutral'), a key player in the insurance sector. In the tech sector, Amazon (which recently reported stellar earnings) was also upgraded; the stock rose nearly 5% today on the news. Market observers say these, and other, upgrades balanced the broad market in view of the crucial jobs report.

Key economic data for the week starting November 9, 2009. Numbers shown are consensus estimates (market anticipates this value) and prior value.

Monday:

Tuesday:

Wednesday:
	Treasury Markets Closed

Thursday:
	8:30 AM CONTINUING CLAIMS Oct-31: n.a. / 5749K INITIAL CLAIMS Nov-08: n.a. / 512K 2:00 PM TREASURY BUDGET (Oct): -$150.0B / -$46.6B

Friday:
	8:30 AM GOODS & SERVICES TRADE BALANCE (Sep): -$31.9B / -$30.7B IMPORT PRICE INDEX M/M (Oct): 1.0% / 0.1% 10:00 AM MICHIGAN CONSUMER SENTIMENT (Nov P): 71.0 / 70.6

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