By Vahan Janjigian - This morning's better-than-expected labor report was welcome news. Although non-farm payrolls continue to fall, job losses of 247,000 were better than expected. July marks the fourth month in a row that payrolls have fallen by less than 600,000. The employment picture is still ugly, but at least it's moving in the right direction.
Yet the strength of the recent rally in stocks already prices in a big improvement in the economy. While today's labor report is encouraging, it only provides further evidence that things are not getting better; they are simply getting worse at a slower rate.
According to the labor report, there are now 796,000 discouraged workers in the economy. These are people who have simply given up looking for work because they believe no work is available for them. That's more than twice as many as a year ago. This partly explains why the official unemployment rate fell from 9.5% in June to 9.4% in July. When people lose hope and stop looking for work, they are no longer counted as unemployed.