Decent rise despite jobs gloom

Small-cap stocks pushed higher Friday, shrugging off dreadful data on the nation’s employment picture as investors focused on finding bargains amid oversold conditions and amid hope that the worst of the economic numbers — which are likely still on the horizon — have already been factored into the decline. The Russell 2000 (NYSE:IWM) closed up 9.95, or 2.01% at 505.79 and is now down 34% for the year. Meanwhile, the Dow is off 33% in 2008 and the S&P 500 is down 37%.

Small-cap stocks lagged the advance today versus large caps, which hints that investors might have been shopping for bargains but they weren’t willing to be overly aggressive on the risk side of things. Throughout the slide off the September highs, small caps have consistently lost ground to the Dow, which is consistent with a risk-averse attitude fortified by the collapse. Once the market has convincingly bottomed out for the move, small caps will likely once again take a leadership role in the recovery, but if this week’s economic data is any indicator, that could take some time to play out.

Today’s monthly employment report was expected to be awful, and it delivered the goods. Non-farm payrolls tumbled 240,000 and the previous month’s reports were revised upward significantly, which means even more people lost their jobs late this summer than we expected. Although the payrolls figure was above the pre-release consensus, it was actually lower than some of the “whisper” numbers making the rounds late Thursday, which may have played a role in letting the market shrug off the jobs report as a non-event. Still, the unemployment rate jumped to 6.5%, or the highest level in 14 years, which is a tough statistic to ignore. However, market perceptions also helped fend off that blow as well, as it is well-known that many economists are looking for unemployment to climb into early 2009, . . .

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