The Bad News on Jobs

So last week's unemployment figures were disappointing yet again. Although the overall unemployment rate was unchanged at 9.6 percent, the economy lost 95,000 jobs in September.

The worse news is that the broadest measure of unemployment, commonly called U-6, dropped again to 17.1 percent, the highest it's been since April. That includes people who have stopped looking for work and people who would like to find full-time jobs but have had to settle for less than that. Temp jobs are up 23 percent since September 2009.

If there's a silver lining in all of this, it's that the private sector did add new jobs for the month, with 64,000 workers hired. The reason overall job loss was so high was that the government shed 159,000 jobs. But even that is problematic. It's one thing when these are census workers losing their jobs, since we expected those jobs to be temporary in the first place. But in September, state and local governments lost more workers (83,000) than did the Census Office (76,000).

The Facebook Stock Fraud

You knew it was going to happen: The Manhattan U.S. attorney's office is investigating a stock-fraud case in which alleged criminals used social media Web sites - including Facebook and Twitter - to pump up stocks. Shareholders who fell for the fraudulent stock touting ended up losing over $7 million. There were 22 people involved here - mostly longshoremen, of all people - who posted "false and misleading statements," according to the complaint filed against them, then made "coordinated purchases and trades... in order to sell the cheaply purchased stocks at higher prices."

The fact that there were so many fraudsters involved here probably was instrumental in duping so many people. If you see 10 or 12 of your "friends" on Facebook all getting excited - and seeming to have insider knowledge - about a particular company's stock, it's easy to fall for the ruse. The wisdom of the crowds is a very real phenomenon.

But this is one more reason to stick with prudent, long-term investing. Once you hear about a hot stock tip, that should be the beginning of the research process, not the end. If all those people had looked into the longshoremen's tips and discovered for themselves whether the stocks were really worth buying, they'd be $7 million richer today.

Raises on the Rise

If you got a bigger raise this year than last year, you're not alone. According to the human-resources consulting firm Aon Hewitt, the average raise received by salaried American workers this year is 2.4 percent. In 2009, by contrast, that same worker got an average raise of just 1.8 percent. According to another survey, the average raise is expected to rise modestly again, to 2.7 percent, in 2010.

The 2009 figure was the lowest in the history of the survey. So in a way, there was nowhere to go but up.

Aon Hewitt also reports that it is getting hired significantly more often to give compensation advice in 2010, which it calls a good signal for the recovery. Put together, if people are getting bigger raises and companies are hiring more top-salaried employees, that's a sign that we may be seeing the first rumblings of a solid increase in employment.

Predictions on Financial Reform

Do you think that the financial reform legislation that was passed over the summer will help our financial sector be more competitive? For most people, that depends on where you live. In the United States, 48 percent of all executives surveyed by McKinsey expect the bill to be either somewhat or very negative with respect to the competitiveness of the U.S. financial-services industry. Only 29 percent expected the effects to be somewhat or very positive.

But in the rest of the world, it's a very different story. In areas outside the U.S., only 25 percent of the executives surveyed said the new law would make the U.S. less competitive. More than half thought it would make the financial sector more competitive.

Overall, 41 percent of the executives worldwide thought the financial reform was good for American banks. Just 38 percent thought it would be negative; only 3 percent saw it as very negative.

Behind the Flash Crash

Remember back in May, when the Dow plunged almost 1000 points within the space of an hour? The official report as to the cause of that little episode came out last week. Here's what happened in a nutshell: A trader put out an order to sell more than $4 billion worth of S&P futures, without specifying a price at which to sell those futures, which would have smoothed the sale out over time. That put 75,000 E-Mini S&P futures on the market all at once. With all those shares coming quickly onto the market, to be sold at whatever price they could fetch, their price came down very rapidly.

That trade was made by an actual trader, but several automated trading programs picked up on the big sale and the price drop, and automatically followed suit. Those S&P futures are considered bellwethers for the stocks in the S&P 500, so when traders saw the futures plunging, many of them began selling off the underlying stocks as well.

Eventually, cooler heads prevailed, and the market quickly made back all those losses when people realized the drop had been caused by, essentially, nothing. The SEC hasn't yet decided if it needs to implement additional regulations to keep such plunges from happening in the future, although it has put circuit breakers on the market to halt or slow trades of any stock that moves more than 10 percent in a five-minute period.

The End of TARP

Last week, the Treasury Department announced that it was in the process of unwinding the billions of dollars it had loaned AIG, the insurance giant at the center of the financial meltdown, and that the government might actually turn a profit on that aspect of the TARP program. TARP is in many ways officially over, so the New York Times yesterday provided a bit of a postmortem on the program. Some highlights:

* Although the bailout fund was initially funded with $700 billion, and is often described that way, it was actually reduced to $475 billion by the financial reform act passed last summer.

* Banks received $250 billion, of which $158 billion has been paid back. The government projects that this aspect of the program will eventually result in a profit of $5 billion to $20 billion for the Feds.

* The Big Three automakers got $82 billion, including money for lenders like Chrysler Financial and GMAC. Of that, about $15 billion has been paid back. For this part of the program, the government expects to eventually lose from $15 billion to $34 billion.

* A fund of $46 billion was created to help troubled homeowners modify their mortgages, but this has been a failure. Only 15 percent of eligible loans have been modified, and all the money is expected to be lost.

Double Dose of Strength

We had good news from two disparate sectors of the economy on Thursday, which may be a positive signal for this recovery. First of all, the manufacturing sector posted surprisingly strong figures in September, with the Institute for Supply Management's business barometer soaring to 60.4. Anything over 50 is considered to indicate expansion. The economists surveyed had expected the number to come in around 55.

Meanwhile, retail stocks posted their biggest quarterly gain since 2003 for the quarter that ended yesterday. The S&P Retail Index was up 19 percent, with the biggest gainers being Liz Claiborne (up 44 percent for the quarter) and the Warnaco Group (up 41 percent).

Those factors probably fueled the mild drop in workers filing new unemployment claims, which dropped by 16 percent last week. None of these figures on its own is the sign of a rip-roaring recovery, but the fact that they're so broad-based gives us reason for cautious optimism.