Let's Go. No, We Can't. We're Waiting for More Data

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Each month, traders, investors, journalists and policy makers wait for the monthly jobs report for a clear indication of the trend. And each month, we're left wishing we had just a bit more information before declaring that the U.S. economy has catapulted to a higher growth plane.

Today's jobs report for November brought good news: a 203,000 increase in nonfarm payrolls; a 0.3 percentage point drop in the unemployment rate to a five-year low of 7 percent; and a partial bounce back in the labor-force participation rate from a 35-year low. Hourly earnings rose as well.

Both the manufacturing and overall workweek increased by 0.1 hour, which doesn't sound like a lot but in the calculation of output, it's the equivalent of adding about 300,000 workers, according to UBS economist Drew Matus. Manufacturers added 27,000 employees last month, the biggest increase since March 2012 and supported by an upbeat reading from manufacturers this week. So what's not to like?

The payroll increase is pretty much in line with the 180,000 average gain during the last three years. Long-term unemployment, which is at the top of Federal Reserve Chairman Ben Bernanke's list of concerns, increased slightly last month while the average duration of unemployment rose to 37.2 weeks, the longest of the year.

Not surprisingly, today's report has already generated taper talk, but I doubt the Fed, with its focus on telegraphing its intentions, is about to spring something on financial markets on Dec. 18. The Fed would be thrilled to see a little above-trend growth with inflation well below its 2 percent target. Janet Yellen, who is likely to be confirmed to succeed Bernanke in January, has advocated an "optimal control" path for the federal funds rate, which, without going into great detail, would argue for keeping the rate lower for longer in the current circumstances. Yellen would probably reach the same conclusion about the Fed's asset purchases.

The Fed has to be encouraged by the good data this week, from manufacturing surveys, to car and home sales, to jobless claims, to today's consumer sentiment report. Still, the final take on third-quarter gross domestic product, a lagging indicator, showed a huge inventory gain, weak consumer spending and no increase in business investment. Capital spending has increased an average 1.6 percent during the past three quarters, making this the worst year since 2009. Small businesses are still struggling.

The all-important holiday-shopping season, which is make or break for retailers, is upon us. Why not wait another month? Maybe December's employment report will be conclusive.

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