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Jobs Data as Investing Tip Sheet?

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With investors searching for clues — any sign at all — on where to invest in 2012, it might be tempting to search today’s employment data for stock tips. But advisers say it’s unwise to draw too many conclusions from one encouraging report.

This morning’s employment situation report offered some positive news. The Labor Department reported that the economy added 200,000 jobs, and the unemployment rate fell to 8.5% in December. Gains for the month were particularly strong in transportation, retail, manufacturing, health care and mining.

While that’s a good sign for those industries, advisers say the news isn’t enough incentive to make big bets. Indeed, the market response this morning was muted, with stocks trading down slightly. Advisers say that’s no surprise, pointing out that the news isn’t enough incentive to make big bets on these sectors. For example, the gains in the transportation sector, which were concentrated in courier and messenger services, may be a seasonal blip, experts say.

Overall, investors shouldn’t invest in a sector based on one month of positive job growth, says Mark Lamkin, the CEO of Lamkin Wealth Management. The more important point is that a fairly wide range of sectors added jobs, which suggests the improvement wasn’t an anomaly, but a sign of real economic growth, Lamkin says. “This type of employment report sets the stage for 3% growth in GDP,” he says.

That’s not to say some of the sectors called out in this report don’t have a lot going for them, says Bob Phillips, a managing principal at Spectrum Management Group. For example, manufacturing expanded in what’s usually a slow part of the year, he says. In particular, auto makers may be poised to do well, since car sales in recent years have been well below typical levels, suggesting there’s some pent-up demand for new cars, and sales may pick up as more people find work, Phillips says. The health-care sector, which added jobs in December, could also benefit from the overall pickup in employment, he says. Insurers should get more customers as more people get jobs, he says.

But advisers caution against picking stocks based solely on this data. “We started off strong last year too, so let’s not get too worked up just yet,” says Jeff Duncan, the president of Duncan Financial Management. The financial advisers says he’s still focusing on dividend payers for now, but keeping an eye on more growth-oriented sectors as the economy continues to show signs of improvement. “I would be buying on major dips and when everybody’s thinking that the market is going to collapse,” he says. “And you know at some point this year we’re going to get a reaction like that.”

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