Investors received the latest jobs data from the Labor Department on Friday. December’s unemployment rate was unchanged at 10%. Employers cut 85,000 positions from their payrolls and dashed hopes that jobs would be added at the end of 2009. Last month’s cuts added to the over seven million lost jobs in the last two years. However, the Bureau revised November numbers by showing 4,000 additional jobs. This breaks the 22-month streak in lost jobs. Stocks reacted positively to the news on Friday, but we wonder how the persistent unemployment affects investors – especially since so many jobs have been lost during the current downturn.

In October, we discussed how jobs numbers could be declining while the market was rising. Our humble conclusion related to companies cutting operating expenses in order to show better-than-expected numbers to investors. Improved efficiency rather than top-line growth was driving earnings. There could be other reasons, though. Two weeks ago Pimco’s co-CEO Mohamed El-Erian pointed out how the government stimulus package is continuing to work its way through the economy. This is the reason we’ve seen a steadily appreciating market since last March. El-Erian said, “We’re on a sugar high. It feels good for a while but is unsustainable.”

No doubt stimulus money is affecting the job market. As late as November, the White House boasted saving 640,000 jobs by stimulus spending so far. Though we could debate their numbers – and Washington figures usually can’t pass muster of an independent audit – injecting money into any business sector will usually be a healthy thing. The current 10% might be higher had not the Feds pumped more into the economy.

The better question relates to you, dear investor. What do you invest in while unemployment is so high? Keep in mind, the US economy has lost 7.2 million jobs which is significantly greater than the amount of jobs cut during the previous four economic downturns. Rapid recovery will be more difficult with this sort of weight on the economy. We’re not exactly dealing with an-early 80’s economy with $1 trillion in national debt. Instead, we are shouldering 12-times the debt load with a more service-based economy. When job recovery happens, it doesn’t appear that it will look the same as it did in the 80’s or 90’s. That’s the broad view.

Here’s a better picture of unemployment by the Bureau of Labor Statistics’ sectors. This may help you see where businesses are willing to invest and where you might want to invest (or avoid) in US stocks or funds.

Unemployment Rate by Sector (as of 12/31/09):

Sector/Industry Rate
Construction 22.7%
Agriculture 19.7%
Leisure/Hospitality 12.6%
Manufacturing 11.9%
Professional/Business Services 10.3%
Wholesale/Retail Trade 9.1%
Transportation/Utilities 9.0%
Information 8.5%
Financial Services 7.2%
Education/Health 5.6%
Government Workers 3.6%