Investment Contrarians

Why You Shouldn’t Get Too Excited About the Jobs Picture

By for Investment Contrarians |

Shouldn’t Get Too Excited About  the Jobs PictureThe labor picture remains precarious. On one hand, Citigroup, Inc. (NYSE/C) announced it was cutting 11,000 jobs worldwide, as the financial services sector continues to be hard hit; while on the other hand, Apple Inc. (NASDAQ/AAPL) announced it would produce at least one of its computer products in the United States.

Wall Street was relieved last Friday after the much-anticipated jobs readings offered much-needed hope that job creation in America continues to be on track.

Job growth is showing signs of wanting to edge higher, as the unemployment rate made a surprising decline to 7.7% in November; 146,000 workers managed to find full-time work, which was well above the 80,000 jobs estimated by

And while I’m pleasantly surprised with the drop in the unemployment rate and continued job creation, the decline in the unemployment rate was attributed to fewer people looking for work, according to the Labor Department. Many people during Hurricane Sandy did not search for work.

Let’s take a closer look at the unemployment rate based on data from the Bureau of Labor Statistics. The November reading was the lowest reading since a 7.3% unemployment rate in December 2008, but the number remains well below the four-percent level we saw during 2006 and 2007. On the plus side, the unemployment rate has improved from the recession high of 10.0% in October 2009, which was the highest level since the 10.8% during the December 1982 recession.

The trend of the unemployment rate shows the improvement since August 2011, when over nine percent of Americans were officially unemployed.

It took close to five years for the unemployment rate to fall below six percent in 1987 from the 10.8% in 1982. A breach below five percent was made in 1997.

While the November unemployment rate reading is encouraging, it’s still well below the record unemployment rate of 3.8% in April 2000, which was largely driven by the boom in technology hiring during the Internet explosion and subsequent bubble.

The problem that I continue to see is that the number of officially unemployed stood at a stubborn 12.1 million in November; albeit down from the recession high of 15.4 million in October 2009, but well above the pre-recession low of 6.7 million in March 2007. (Source: Bureau of Labor Statistics web site, last accessed December 7, 2012.). Also, the unofficial unemployed number is 22.5 million, which is another story that needs to be addressed. (Source: U.S. Debt Clock web site, last accessed December 7, 2012)

Moreover, there’s still a question of quality versus quantity. The quality of the jobs being created continues to be a sore spot with me. For example, many of the jobs created tend to be of lower quality, such as food services and low-skilled positions. While every job is important, these so-called “McJobs” are low-paying, and in my view, they do little to drive the economy.

At the end of the day, we need to see higher-wage jobs generated that will really add a boost to consumer spending and gross domestic product (GDP) growth.

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