federal reserve

Jobs report lifts spirits

Friday Dec. 4, 2009
Posted 11 a.m. Eastern

Oh what a pleasant surprise. For much of the past two years, the monthly jobs report, released the first Friday of every month, has been very effective at casting a dour pall over the upcoming weekend. But not this time.

Don't get too excited. It's not like we're seeing actual job growth, and until we do, consumers will remain hesitant to resume the more typical pattern -- and American pastime -- of spending themselves silly. But the 11,000 job losses for November barely registered on the Richter scale, and previous estimates for September and October were revised lower in a mighty fashion. Surprised?

While much better than forecast, it doesn't mean we're out of the woods. In fact, Mortgage Bankers Association Chief Economist Jay Brinkmann forecast these large revisions during a presentation back in October. He said that because we're seeing less of the usual seasonal job patterns, some of the original job loss estimates may have been overstated. In other words, because we didn't see the usual hiring surge -- of seasonal retail employees for example -- during the fall months, the job losses originally estimated for September and October were not as high as originally thought.

And of course, the November figure will be revised twice more in coming months and that can certainly go either way. But no matter how you slice it, this is still light years away from the 600,000 to 700,000 job losses we were seeing from December 2008 through March of 2009.

Employment typically lags an economic recovery, and this time will be no different. We'll likely see the unemployment rate and pace of job losses rise again over the next few months, but modestly so. And the labor market improvement does provide some of the cover the Fed would need to begin raising interest rates once it becomes necessary to do so.

The question will remain, however, whether they will have the commitment to do so. With Bernanke facing a grilling from congresspeople anxious to get their mugs on the evening news and a movement calling for greater transparency of the Fed's monetary policy actions, it is a legitimate concern as to whether the Fed can and will act forcefully enough in the face of political forces to raise interest rates and unwind liquidity when that time comes.

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