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Good News Boosts Stocks, but Look Closely at Jobs

October 9, 2012

Before one gets too encouraged by the jobs report, however, we would note that part-time jobs accounted for much of the drop in the unemployment rate. The U6 unemployment rate, which includes part-time workers and those job seekers who have stopped their job search, remained unchanged at 14.7 percent. We view the overall rate of job growth as sluggish, given that only roughly half of the 8 million-plus jobs lost in the past recession have been recouped.
-Wasif Latif, vice president of equity investments

Stocks advanced and U.S. Treasury bonds declined on generally positive U.S. economic data releases this week.

The Institute for Supply Management (ISM) Manufacturing Index and the Non-Manufacturing Composite for September both exceeded expectations and increased from August, registering 51.5 and 55.1, respectively (readings above 50 indicate expansion).

Total vehicle sales for September were a robust 14.9 million units at an annual rate, higher than expected.

Friday's jobs report also showed progress, with the Labor Department reporting that 114,000 net jobs were added in September, and a large upward prior-month revision to 142,000 from August's initial 96,000 estimate. In addition, the unemployment rate, based on the separate household survey, dropped below the 8.0 percent level to 7.8 percent, the lowest since January 2009.

Before one gets too encouraged by the jobs report, however, we would note that part-time jobs accounted for much of the drop in the unemployment rate. The U6 unemployment rate, which includes part-time workers and those job seekers who have stopped their job search, remained unchanged at 14.7 percent. We view the overall rate of job growth as sluggish, given that only roughly half of the 8 million-plus jobs lost in the past recession have been recouped.

Countering the positive reports of the week were the announcement that August factory orders declined by 5.2 percent, and construction spending dropped by 0.6 percent.

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