Why the Dow's Up Today

The Dow (INDEX: ^DJI) is pushing higher today after a strong jobs report. The U.K.'s FTSE 100 (INDEX: ^FTSE) is up about 0.4% as well. This morning, the Bureau of Labor Statistics reported that the U.S. economy gained 227,000 jobs in February.

The unemployment rate has fallen considerably over the past half year or so, a whopping 0.8 percentage point since August.


What makes reports like today's particularly encouraging is that we're also seeing broader measures of unemployment decline as well. The economic downturn wasn't just about job losses in a particular sector of the economy; as companies cut back, even employed people found it more difficult to get full-time work. But since October, we've also seen the broadest measure of underemployment fall from 16% to 14.9% today.

As I explained in this morning's market preview, an improving employment picture is vital for banks such as JPMorgan (NYS: JPM) and Bank of America (NYS: BAC) and other cyclicals such as Alcoa (NYS: AA) and Caterpillar. More jobs, especially decent-paying ones, help to clear up three of the four big problems facing banks right now: loan performance, loan growth, and trading and investment banking performance. (The fourth is mortgage-bubble-related litigation.) JPMorgan, Alcoa, and Bank of America are the Dow's first, fourth, and sixth best-performing stocks so far today, up 2.3%, 1.1%, and 0.9%, respectively, by midafternoon.

The economy still has a long way to go. It'll likely take years even at today's clip to make it back to full employment. So this isn't the time for our leaders to get complacent and lose focus. But the steadily improving jobs market sure is good news.

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At the time thisarticle was published Ilan Moscovitz doesn't own shares of any company mentioned. The Motley Fool owns shares of JPMorgan Chase and Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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