Unemployment Picture a Matter of Perspective

NEW YORK ( TheStreet) -- The nation's unemployment rate may have flattened in November, but heavy job losses expected in coming months will continue to provide fodder for argument between bulls and bears about the state of the recovery.

The Labor Department is expected to report 125,000 nonfarm payroll losses in November, compared to 190,000 jobs lost in October, according to the consensus estimate of economists polled by Thomson Reuters. The nation's jobless rate is expected to remain steady at 10.2%, a 26-year high.

But individual estimates are varying widely ahead of this report, with some predictions approaching declines of 200,000 and others forecasting a near flat result.

"I do think job losses will probably show up again in December and January and perhaps by February or March it will have hit bottom," PNC Financial chief economist Stuart Hoffman said. "I don't think November will be the bottom. If you believe that a bottoming out is a several months process, it might be the beginning of the bottoming out, but I don't think it means we've hit bottom."

And even if the job loss and unemployment numbers are near the consensus estimates, bulls will argue the slowing losses are a good sign, while bears will counter that the economy will be hard-pressed to grow until jobs are being created again.Investors are adjusting to the new normal, where a five-figure cut in jobs could be considered a market-moving win to the upside.

"I think that kind of drop is what it's going to take to move the market," LPL Financial economist John Canally said. "It's probably going to take a drop of 75,000 or 65,000 to actually jolt the market a little bit. Aside from that, if we get a number anywhere from down 100,000 to down 150,000, I don't think the market is going to care one way or the other."

Hoffman said, "If the November number showed a bigger loss than the average of the past three months, pending any revisions, that clearly would be a step backwards."

ADP on Wednesday estimated a greater-than-expected 169,000 jobs were slashed from private sector payrolls in November. Though the tally was an improvement from the prior month, several market observers note that the report has lost its luster after overestimating job losses in recent months.

Some of the nation's largest companies continued to announce layoffs during the month, with headlines from the likes of Aetna ( AET), Applied Materials ( AMAT), Alcoa ( AA) and Boeing ( BA).

Given the lingering pessimism in the markets, Canally said that a positive job print in November would "blow people out of the water." Interestingly, it's worth noting that the very fact that some analysts are anecdotally talking about a positive jobs number at all -- though far-fetched -- shows the subtle changes from months ago.

Still, an easing or tapering off of job losses is what's expected for now. There are plenty of economic indicators that need to improve or continue trending upward before observers will feel comfortable predicting future employment growth. Hoffman said he'll be looking for "decent" holiday retail sales and ISM manufacturing and non-manufacturing data demonstrating continued month-over-month expansion, among other things.

But in a report released Thursday morning, the ISM's index on the service industry showed the sector contracted for the first time since August, reading 48.7% in November. A reading on the manufacturing sector continued showing growth earlier in the week, albeit at a slower rate.

Dour retail sales figures for November, released Thursday, also dominated headlines.

But market observers are scrutinizing initial claims data to forecast the future jobs mosaic, and at least there's promise on that front. Indeed, the number of first-time applications for unemployment benefits slid unexpectedly to their lowest level in over a year, landing at 457,000 last week, despite forecasts for a rise to 480,000. Ideally, initial claims will need to track below 450,000 for four to eight consecutive weeks before sentiment turns more optimistic about job creation. The recent declining trend, however, is welcome.

"If you look at the claims data, it's no longer tracking with the jobless recoveries of the early 2000s and early 1990s," Canally said. "It's really tracking very close to the more robust recoveries of the 70s and 80s."

Still, Canally also notes that it's difficult to compare to robust job recoveries of yesteryear, since it's so much easier to jump-start production today by outsourcing employment overseas.

If you want any sense of the importance of Friday's jobless figures, consider the political ramifications. When the nation's headlining unemployment rate topped 10% for the first time last month, one could argue that the mantle was passed to President Barack Obama from his predecessor, officially becoming accountable for the nation's economic woes. So much so that the White House is hosting a jobs summit on Thursday ahead of the Labor Department report on Friday, bringing together a cross section of business owners, labor leaders and experts to talk job creation.

The pressure is on to show jobs growth. Without it, the president's domestic agenda and political party advantage in Congress remain at risk. Whether the summit is orchestrated press puffery or if genuine ideas will result remains to be seen.

"If the rate creeps higher, there's just going to be more pressure to do something out of this jobs summit and make something happen," Canally said. "But it's just silly to think that you can get a bunch of politicians together and create jobs at the drop of a hat. If jobs were to be created, they'd just be created."

--Written by Sung Moss in New York

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