Breakout

Unemployment Rate Hits 4-Year Low But Markets Remain Skeptical

Breakout

As much as his fans scream and yell when he walks on water or levitates, most people have a pretty good idea that magician/illusionist Criss Angel is somehow tricking them and not actually defying the laws of physics.

In much the same why, when this morning's surprisingly strong jobs data came out, professional investors and economists alike knew immediately that something was up. In a month when one of the nation's most disruptive storms in recent history occurred, for the Bureau of Labor Statistics to report that Hurricane Sandy did not have an impact and the unemployment rate fell to a four-year low of 7.7% and 146,000 new jobs were created, that defies the laws of reason.

"It's a little hard to believe quite honestly," says Dan North, chief economist at Euler Hermes, in the attached video. "If there's any report that deserved caveats and conditions it's this one."

And he's not alone. Peter Kenny from Knight Capital calls the report a ''head scratcher'' in a note to clients today, saying he never looks a gift horse in the mouth, but just can't get comfortable with the numbers. And Andrew Wilkinson, chief economic strategist at Miller, Tabak & Co., who correctly called for a much stronger than expected number yesterday, is already expecting the 20,000 reduction in construction jobs to be short-lived, reminding clients that "we know what follows any disaster."

Related: Resist Urge to Panic on November Jobs Report Says Wilkinson

It's not like the markets weren't ready for a wild pitch, so to speak, of a jobs report. The Wall Street Journal went as far as calling it "the least important jobs report in five years" given the diffused post-election environment and the fact the Fed meets next week.

The reaction in financial markets so far has been modest, as investors are seeing right through the headline number and seized upon the fact that the labor force fell by 350,000 last month, while the participation rate also dipped to 63.6%.

"You saw the unemployment go down this month sharply, but probably for the wrong reason," North says, adding that the report is positive but still "way short of what we need to have for good growth."

With the jobs report now behind us, we begin to get set for the Fed's last meeting of the year, next Tuesday and Wednesday, with comparably low expectations, as economists like North, and presumably those that sit alongside Ben Bernanke at the central bank too, did not see this report as a game changer in any way.

What that means is that we can, as they say in the TV business, return to our regularly scheduled programming which means our singular focus on fiscal cliff resolutions can resume.

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