What the Latest Jobs Report Means for Investors

Perhaps this current rally isn't so ridiculous after all.

The new jobs report came out today, and it paints a clear picture of a nation that is making significant economic progress. Non-farm U.S. companies added 227,000 jobs in February – the third straight month in which more than 200,000 new jobs were created, according to the U.S. Labor Department.

Also, 40,000 jobs were added to the January employment report, bringing the total for that month to 284,000. The improved January numbers and the better-than-expected February numbers bring the jobs growth average over the last three months to 245,000 – the fastest growth rate since 2006, and nearly double the growth the U.S. economy saw from May to November last year.

While the unemployment rate remained unchanged at 8.3%, it doesn't erase the fact that 735,000 U.S. jobs have been created in the last three months. That's a meaningful number – one that even the most cynical economist can't sneeze at.

It doesn't mean the U.S. economy is out of the woods. Unemployment is still nearly double the 4.4% it was five years ago. If you include part-time workers among the ranks of the unemployed, the data shows that nearly 15% of Americans are still seeking full-time work. And even that number doesn't include all the folks who have stopped looking for jobs after years of empty searches.

Still, this isn't 2009. The unemployment rate isn't 10%. More businesses are adding jobs, not cutting them. Talks of a double-dip recession have quelled – at least for now. Though the U.S. is still buried under a mountain of debt – $15 trillion dollars worth, as of this morning – our debt problems pale in comparison to what's happening in the eurozone. America isn't Greece, nor is it Italy, Portugal or Spain, for that matter.

That's not exactly high praise. But given where the U.S. economy was three years ago, any improvement is good. When the improvement entails three straight months of more than 200,000 jobs being added, that's meaningful.

So what does all this progress mean for stocks? Well, in the very short term, the markets are up this morning after the employment report was released. As of 1:30 p.m., the S&P 500 had risen 0.54% for the day to 1,373. The Dow Jones Industrial Average was up 36 points, or 0.3%, to 12,944.

But those gains are just the latest move in a rally that has now lasted more than three months. Since November 25, the S&P is up nearly 19%. For the year, the index has risen 8.5%. Tuesday was the first day stocks had fallen more than 1% in 2012.

That's a complete reversal from a year ago. Though the S&P 500 was virtually flat for the year, volatility ruled. The benchmark index moved either up or down more than 2% on 35 different days. Uncertainty prevailed, and the lack of investor confidence in the U.S. economy was palpable.

In the absence of strong evidence that the U.S. economy was rapidly improving last year, the markets were instead ruled by news out of Europe, sending stocks on wild day-to-day fluctuations. When sovereign debt issues in the eurozone got worse, stocks fell. When news or even rumors of a European Central Bank bailout to stop the bleeding cropped up, stocks soared. Either way, the European debt crisis dictated what was happening in the U.S. markets.

So far, 2012 has been different. The news out of Europe hasn't gotten much better, but U.S. investors have largely tuned it out. As our own Jason Cimpl has repeatedly noted, volume has been consistently low this year. That has certainly played a role in stocks' meteoric rise of late.

But signs of life in the U.S. economy have certainly helped take investors' minds off what's going on in Europe. And today's jobs report was another big sign.

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