Question:  Following up on BuyandHolder Bryan Fish’s question last week…

Following up on BuyandHolder Bryan Fish’s question last week about what recent government reports mean, we are covering the recently released unemployment rate below. To read last week’s column about the productivity rate, click HERE.

The Unemployment Rate

The good news here is that for July unemployment actually dropped, albeit slightly, from 9.5% to 9.4%. Not exactly an overwhelming number but certainly better if it rose to 9.6%, which is what some economists expected. We also want to point out that this is the first decline in unemployment since April 2008.

Note: Analyzing government statistics is not an easy black or white, true or false situation. And here’s a perfect example. The unemployment rate is measured by a survey of households in which participants are asked if they have a job, if they want a job and if they have searched for a job. The Labor Department then classifies “unemployed” as someone actively seeking work. Thus, a decline in the unemployment rate might be in part made up of people not looking for work! Perhaps they’ve simply given up or decided to go follow President Obama’s advice and go back to school. Therefore, if people drop out of the work force, then the unemployment rate might decline simply because fewer people are officially considered jobless. 

Nevertheless, as the economy improves, more people will probably look for jobs, including those who “gave up” or are in school.

The Number of Jobs Lost    

Another recent statistic to take a look at is the number of jobs lost (or gained). Issued by the U.S. Labor Department, this number is based on a survey of employers. And in July, we lost 247,000 nonfarm jobs. That may seem like a large number but keep in mind that since the recession began in December 2007, the U.S. economy has lost some 6.7 million jobs.

As an investor (or as someone looking for work), the sectors where there were job gains are key. Shares of publicly held, well-run companies in these sectors might see increased earnings along with increased share prices and/or increased dividend payouts. In July, those areas were: government, health, education and, surprisingly, leisure & hospitality.

The following job loss sectors are also important when reviewing your portfolio:

            Sector                             Number of jobs lost in July          
--------------------------------------------------------------------------------------------------------------
Construction                                         76,000

Manufacturing                                      52,000

Retail                                                   44,000

Professional & business services           38,000

Weekly Hours Worked

To end on a positive note, the number of average weekly hours worked posted an increase. Hours rose by 0.1 to reach 33.1 weekly hours worked in July. This was the first such increase since August 2008. So again, it appears as though businesses may be expanding.

Bottom Line: Is the recession over? Definitely not. But should  these three trends continue -- lower unemployment, greater productivity, and more hours worked, we may indeed see a pattern of recovery.