With last week's bank holiday, the flow of economic indicators was at a low ebb. Initially, unemployment claims looked encouraging, as did the more obscure job openings report from the Labor Department. FedEx FDX and UPS UPS both offered favorable comments about the upcoming holiday season, providing one of the first confirmations of improving conditions in the battered transportation sector. Small business optimism managed one of its best monthly improvements during October, but remains mired at depressed levels.   More 

I have never been a huge fan of the monthly job report, so I am glad to see other important employment indicators paint a more flattering picture of the employment landscape than Friday's report of 10.2% unemployment. These include the Challenger Gray and Christmas Layoffs Report, the employment component of the ISM purchasing managers report for manufacturers, and the ADP Report. Shockingly, the market seems to agree and is reacting far more favorably than expected to Friday's numbers.

News from the construction, real estate, manufacturing, and retailing sectors is better than expected. In the corporate world, merger mania continues: Black & Decker BDK and Stanley Works SWK agreed to merge, as did Berkshire Hathaway BRK.B and Burlington Northern BNI. Warren Buffett proclaimed Berkshire purchase to be "an all-in bet" on the U.S. economy. Given the wide variety of goods shipped via rail, I think Buffett's assessment is correct.   More 

In today's employment report, we were looking for October job losses in the 160,000 to 170,000 range. We got 190,000 losses, and an unemployment rate of 10.2%. This looks very disappointing on the surface. But the report also reveals that the Bureau of Labor Statistics made very positive adjustments to the August and September job-loss numbers. The losses in total nonfarm payroll employment for August was revised from 201,000 to 154,000; the change for September was revised from 263,000 losses to 219,000. These are big adjustments. That's about 100,000 more jobs than we that we had, and they're across many different sectors. If you net the past three months together, we're better off today than we thought we were yesterday.   

Recessions share a few things in common, and not just that they involve broad, deep, and persistent declines in economic activity. Another common feature is that they breed their own recovery. During a recession, businesses and households improve their productivity, with difficult-to-measure contributions to real economic growth that ultimately sparks increasingly generalized risk-taking and confidence in future generalized growth. Stock prices tend to recognize and reward those efforts, and in timely ways that help anticipate recoveries.

As I mentioned earlier this week, the 1990-91 recession has much in common with the latest downturn. How did stock prices do during and after the 1990-91 recession, and what can we learn from that episode?   More 

The past two weeks of data is consistent with 3.5% to 4% GDP growth in the second half of 2009 and with more than 3% growth in 2010.

The economy has come along way. In June, 2% growth seemed like a stretch, and the consensus was for 1% or less growth, with even that more heavily weighted to the December quarter. At the same time, unemployment forecasts have stayed the same or gone higher. This means one of two things, either employment is going to get surprisingly better in the short run or corporate profits are going to show some sharp improvements (revenues up, labor costs down equals a lot more profits).

I am rooting hard for improvement in the labor markets, and I've recently seen some positive signs.   More