It's a mistake to think that all the bad stuff is behind. Even so, today's U.S. employment numbers make it possible for even the most cautious observer to believe that things may be turning around.
According to the U.S. Bureau of Labor Statistics, U.S. employment dipped by 124,000 in the month of December. That's a big number and it takes the total number of jobs lost in the United States to 1.1 million in the year 2001. Having said that, the market was prepared to see jobs go down by 150,000 in the month. The U.S. unemployment rate jumped to 5.8% in December. That's high-the highest in nearly seven years-but it matched the market's expectations.
Some of the details give bullish signals.
The service sector created jobs for the first time since August. Hours worked moved up. And construction jobs climbed, spurred in part by incredibly low interest rates.
The big picture emerging is of an economy on the upswing. Even so, the U.S. consumer sector is still looming like a giant question mark over the whole thing.
Buried in today's report is the fact that jobs in the retail sector fell by 77,000 in December. Fearing grim holiday sales, retailers cut back on employees early in the month. Although the December sales numbers may end up being a little less depressed than expected, tough times may be ahead. Job and income losses through 2001 may well take their toll in the early months of 2002, meaning more jobs lost in the retail, and in other sectors.
So on balance, is there much to rally about?
Well, yes, but the enthusiasm should probably be contained. If employment losses are plateauing, then that should lead to an uptick in corporate profits later this year. The opposite is true for bonds. If indeed the worst of the recession is done, then interest rates may be headed up sooner or later.
Still, this is just the beginning of the beginning of the end of the recession. Wait and see might be a better policy for everybody.
Stay tuned.