Here is some good news. The national unemployment rate dropped 0.2% in November (from 10.2% to 10.0%). True, it dropped to the level that is 2X the widely accepted full employment level (5%), but at least it seems to have temporarily stopped getting worse. The US economy has shed jobs for 23 straight months. The Bureau of Labor Statistics (BLS) data seems miss-aligned with the jobs data we received earlier in the week from both ADP as well as Challenger Grey & Christmas, but we’ll accept it at face value. The reasons to be troubled remain:

- No so sign of hiring.

- The proportion unemployed for a long period of time (6 months+) remains at historic peak levels.

- The proportion of underemployed remains at historically bad levels (17%+).

But I am cautiously optimistic that perhaps we’ll see unemployment peak in the middle (3Q) of 2010. The view based on previous recessions would have unemployment peaking around 12% in early 2011. We desperately need to see unemployment stop rising. It will be many years (a decade+) before we are able to get our economy back to full employment. Given that we still face a tidal wave of foreclosures and vacant housing in 2010, having unemployment begin to stop getting worse is welcome. As of November 2009, 1 in 4 US mortgages is under water. Deutsche Bank forecasts this going to 1 in 2 by early 2011. It is true that I’d like to see equity markets fairly priced, and that might be a 25% drop from here (that we would see little of), but I am not looking forward to the prospect of a 50% stock market sell-off—which is what we’ll see if unemployment continues to rise into 2011.