Today the Bureau of Labor Statistics released the employment figures for November. They weren't pretty. Nonfarm payrolls fell by a much bigger-than-expected 533,000. Even worse, the September and October figures were revised. October's job losses went from 240,000 to 320,000. September's went from 284,000 to 403,000.
The service sector alone lost 370,000 jobs in November. Losses were widespread from retail to automobile dealerships to leisure and hospitality. Health care was the only bright spot, gaining 34,000 jobs.
Surprisingly, the unemployment rate ticked up to just 6.7%. No doubt, this measure will rise considerably in coming months. I was criticized for suggesting it could surpass 8% by mid 2009. I sincerely hope I am wrong about that.
So far in 2008, the economy has lost an astounding 1.9 million jobs. It won't be easy to put all these people back to work on short notice. But that is exactly what President-elect Barack Obama hopes to do. Part of his economic stimulus plan is to increase infrastructure spending by $60 billion over 10 years. He estimates this will create about two million jobs--about the same number of jobs lost so far this year.
The American Society of Civil Engineers estimates that $1.6 trillion is needed just to bring all U.S. public works to good condition, so increasing spending on infrastructure is certainly a good idea. It is also inevitable. But $60 billion over 10 years is just a drop in the bucket. Despite so many other priorities right now, such as bailing out the the finance and auto industries, this figure is likely to rise.
The market initially responded to the employment figures just as one might expect. It sold off. Yet by the end of the day, stocks were up. The Dow finished higher by 259 points. I don't think investors are wrong to bid up stocks right now. The recession, which started a year ago, is already growing long in the tooth; and when employment numbers get this bad, it often marks a bottom in stocks. I continue to expect a strong rally in 2009.