The December 6th job report came out even better than the markets had anticipated. This article by El-Erian describes that the net monthly job creation came in at 203,000 which is approximately 20,000 better than was anticipated. Also worth noting is that the new jobs did not emerge from any particular sector but instead came from almost every industry. This means that unemployment is back down to where it was in November of 2008. In addition to there being more jobs, the article reports that average earnings and hours worked grew as well.
With those facts now stated, let's explore what the job market means for the economy in general. There are a couple of key areas directly impacted by the labor market. First is Main Street. By Main Street we're essentially referring to everything other than Wall Street. This primarily would include individual investors but also includes the overall economy. With higher employment rates and higher wages overall, individual investors are more able and willing to start investing their money in the markets again. This naturally improves the overall status of the economy.
Not only does the higher employment rate help Main Street but it also has a major impact on Wall Street. Wall Street consists basically of major corporations, executives, and financial institutions. With the improved employment rate, companies become not only more able, but also more willing to invest in capital and other growth opportunities. If we see similar improvements in future months, and if we really see corporations starting to invest more in growth and capital, this could potentially open the door for the Fed to gradually normalize monetary policy. Normalizing the policy has the potential to prevent market disruptions like those we saw last May-June and thus help further stabilize the financial and overall status of the economy.