Fiscal Cliff Smothers Market, Not Jobs Report

NEW YORK ( TheStreet) -- Even the monthly jobs report can't muzzle fiscal-cliff chatter.

Hours after the Bureau of Labor Statistics revealed on Friday that nonfarm payrolls added 146,000 jobs in November, the markets were mixed, thanks in part to House Speaker John Boehner's ability to yank investors back to post-election politics.

"There's about a 15-minute attention span to the employment situation, and then it's back to fiscal cliff talks and we're focused on that," said Brad Sorensen, market and sector research director at Charles Schwab. "The dip to 7.7% was a little bit surprising, but we never want to ... put too much weight on any one number and it fits in with the trend."

Whether it was the better-than-expected payroll number or that the labor participation ticked down again, economists and analysts have dug through the data without much to sway them in either direction on the markets.

The major U.S. equity indices jumped at the opening on Friday, but quickly reversed direction and then moved in separate directions -- the Dow Jones Industrial Average climbed, the S&P 500 inched slightly higher off the flatline and the Nasdaq decreased.

Throughout most of 2012, the monthly employment situation gripped investors, politicos and citizens who were looking for any signal of improvement in the U.S. economy and what it may mean for the outcome of the presidential election.

Americans grew accustomed to Mitt Romney's doom-and-gloom statements and President Barack Obama's "it-takes-time" commentary.

Little discussion circled the so-called fiscal cliff -- when tax relief measures and deep spending cuts will automatically go into effect -- but some investors were more concerned about it than the election outcome.

Now that voters have selected Obama to a second term, they want Congress and the President to solve the country's fiscal woes, according to a Gallup poll.

The drop in labor participation rates caught the attention of many economists and analysts.

The BLS reported that the civilian work force declined by 0.2 percentage points to 63.6%, which offset the increase of the same amount in October.

"That's the part of it that is not good news," said David Weiman, an economist at Barnard College in New York City. "Overall I say we got the growth in employment numbers, and that's important, but on the other hand you can't discount the fact that we still don't have robust enough growth that's bringing people from the unemployment rolls into employment and is also taking those folks that are sitting on the sidelines."

Press release statements about the monthly jobs report had become typical during election season, but political leaders used the event to tie it to the fiscal cliff

House Speaker John Boehner (R., Ohio) blamed Democrats' budget plan for "slow-walking" the economy to the edge of the cliff.

"The Democrats' slow-walk strategy is unfair to taxpayers, unfair to small businesses, and unfair to all those looking for work," Boehner said in a statement.

House Minority Leader Nancy Pelosi (D., Calif.) said that the November report proved that the private sector was continuing to grow and that it meant legislators would have to restore certainty to middle-class Americans.

"There is no reason for Republicans to hold the middle class and our economy hostage to more tax cuts for the wealthy and to drive our country over the fiscal cliff," Pelosi said in a statement.

The White House also jumped on the fiscal cliff message as Chairman of the Council of Economic Advisers Alan Krueger said in a statement that extending tax cuts to middle class families was the most pressing issue facing the country.

"It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007," Krueger said.

Consumer Sentiment printed much lower than expected (74.5 from last month's 82.7), but it may not have affected the markets as much as anticipated.

"We don't try to put too much faith on consumer sentiment, we like to look more at what consumers do, rather than what they say," said Sorensen. "Reading some of the retail sales numbers, looking at the consumer confidence board's confidence reading, ... I don't want to put too much on the University of Michigan's reading, ... but it doesn't appear to be that the sentiment has gotten to the point where they're stopping spending or that they're really paring back on holiday spending."

Many economists had expected the effects of Hurricane Sandy to slam the November jobs report -- a survey of economists by Thomson Reuters had forecast the unemployment rate to remain at 7.9% and for payrolls to rise 93,000 -- but the BLS noted that affected states were within normal ranges.

Investors and politicians may want to keep an eye on next month's report.

"I think you have two problems: One is that next month you could see the impact of Hurricane Sandy that we thought we'd see this month, and the second thing is maybe the impact was really there and you'll see an adjustment," said Randy Frederick, managing director of active trading at Charles Schwab.

For each monthly employment report, the BLS prints a revision of the previous month's report.

Friday's report likely didn't garner the same interest it had generated during the presidential election, but worries of a fiscal cliff have guaranteed that a dwindling participation rate and a struggling employment environment won't soon be forgotten.

-- Written by Joe Deaux in New York.

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