Job Market Still Shows No Sign of Life

NEW YORK ( TheStreet) -- The unemployment rate remained unchanged at 9.7% in February, while the broadest measure of joblessness increased in January. More workers took part-time jobs to make ends meet, and the unemployed stopped looking for work out of discouragement.

Severe February weather that closed businesses and a delay in the reporting of job cuts may have played a role in the jobless numbers but, either way, until companies hire, economic growth will be restrained.

The prospect of a "jobless recovery" is disconcerting. The result could be a fragile economy if strong employment and consumer spending don't play a role. Bloated payrolls before the recession and recent lean times have led to greater efficiency in lieu of hiring.

Goods-producing and manufacturing continued to lose the most jobs in February, while business services, education and services were the only industries to add a significant number of workers. Overall payrolls shed 36,000 nonfarm positions, about 10,000 more than in January. Those numbers are less than economists' estimates -- 68,000 jobs -- though the impact of foul weather could make the number susceptible to an upward revision.

Bulls looking for signs of life can be comforted by the fact that the numbers beat expectations, but the long-term view on the economy is gloomy. With employment remaining high and workers increasingly becoming discouraged and accepting part-time positions, investors should expect that interest rates will remain low as the Federal Reserve will want to avoid stomping out growth.

Investors should consider remaining in large-cap stocks that are insulated from economic uncertainty. With the high amount of ambiguity in each economic report, investments in stocks like Wal-Mart ( WMT), Microsoft ( MSFT), Johnson & Johnson ( JNJ) and Travelers ( TRV) are solid investments that allow for equity-market exposure without the higher volatility of smaller companies.

Hopes last year that 2010 would see an uptick in hiring seem overly optimistic. At this point, investors can be happy that unemployment isn't rising, but there is little to actually spur action or bullish sentiment. Growth may be returning in a small way, but without employment to back it up, the economy will be shaky at best.

-- Reported by David MacDougall in Boston.
Prior to joining Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.