If you glanced at just one or two headlines from last week's reports on the U.S. economy, you might have concluded that things haven't changed that much. In fact, digging deeper reveals that business conditions are improving.

Here's the lowdown on the week's data:

First, although January's job report from the U.S. Labor Department indicated that the economy created only 36,000 jobs -- lower than the 140,000 Bloomberg forecast, the report was filled with more qualifiers and conditions than a new-car lease.

The biggest? January historically is a very volatile month for the report, and it's typically followed by a substantial revision, as more data become available. Look for that to be the case especially this year, due to January's many snow storms/blizzards that likely depressed job totals.

Factories Keep Humming

Second, when one gets a below-trend monthly job-creation total in an expansion, it's not unusual for the next month to be above-trend. And with monthly job creation averaging about 94,000 over the past 12 months, it wouldn't be surprise to see a 125,000 plus month in February.

Third, after creating 14,000 manufacturing jobs in December, the nation added an impressive 49,000 in January -- an uptrend that shows the expansion in the factory sector is strengthening. To be sure, monthly manufacturing job gains probably won't continue at a near 50,000 pace, but if the gains can remain above 30,000, that would suggest ongoing expansion in the nation's industrial core -- something that bodes well for job growth.

Fourth, the unemployment rate fell to 9% from 9.4%, but investors should keep in mind that the January report contained the Labor Department's annual adjustment for population size and composition, which makes it hard to compare the January statistic with December's. What's a better way to evaluate the unemployment rate? Wait and see how the unemployment rate fares in the months ahead.

Also, the 36,000 job gain payroll report diverged substantially from ADP's (ADP) private payroll gain of 187,000 jobs for January. True, there isn't a strong correlation between the two reports, and they often differ. But when the gap is that large, it suggests one is off by a lot, or each is off slightly. Further, given the current trend toward fewer layoffs and increased hiring, the bias here argues that January job growth probably was 125,000, in other words closer to the ADP estimate.

The bottom line? Investors shouldn't read too much into January's low 36,000 top-line total. Wait for the February report: If fewer than 100,000 jobs are created this month, that would a troubling sign for the economy. However, if more than 150,000 new jobs appear, that would signal that labor markets continue to heal.

Other Signs of Strength

Also, investors should keep in mind that although the jobs report contained many qualifiers, three other key economic reports indicated that the U.S. economy is getting closer to self-sustaining expansion status.

The manufacturing sector expanded at its fastest pace in almost seven years in January, as the Institute for Supply Management's (ISM) manufacturing index rose to 60.8 from 58.5 in December -- above the 58.5 Bloomberg estimate. Readings above 50 indicate an expansion.

Key index components also rose, with the closely-watched new orders component -- a gauge of future demand -- surging to 67.8 from 62. The employment, production and inventory components also all increased, and continue to indicate an ongoing expansion in manufacturing.

December's factory orders report also confirmed the ongoing manufacturing expansion, rising 0.2% -- light-years away from the minus 1.4% Bloomberg estimate.

Equally significant, the more-telling ex-transportation component rose 1.7% in December, after a revised 3.3% gain in November. Economists and institutional investors focus on the ex-transportation component because airplane/auto orders can be especially volatile. The strong ex-transportation statistic provides further evidence of a broad-based manufacturing recovery.

Finally, the services sector continues to hold up its part of the "economic recovery bargain," as the ISM's services sector index increased in January at the fastest pace since 2005, rising to 59.4 from a revised 57.1 in December. And like the manufacturing sector index, key service components -- business activity, new orders, employment and inventories -- all rose. That points to continued growth in service sector jobs -- something that's critical for lowering the unemployment rate, given the U.S.'s services-dominated economy.

Slow Healing in the Labor Market

The relevant take-a-ways for investors from this week's economic data?

First, in general, regarding the jobs report -- don't put too much emphasis on the top-line statistic. Remember, it's only one month, and revisions are likely.

Second, often one has to dig deeper to parse the jobs report for other, investor-relevant data. January's snow storm-depressed top-line total of 36,000 was disappointing, but sector data indicated that labor markets continue to heal, and next month's job report probably will show a better than 125,000-job increase, perhaps higher, in addition to an upward revision for January.

Third, other manufacturing, services and business activity data show a U.S. economic expansion that's strengthening.

Don't misunderstand: The recovery isn't yet self-sustaining yet, nor is job growth sufficient for the U.S. Federal Reserve to start winding down its QE2 stimulus program. But the world's largest economy appears to be shifting from second gear to third gear -- which bodes well for both corporate earnings growth and job growth in 2011.

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