Thus far, it has been a very good week for the major averages.  The S&P 500 is up 3.0%, but the Russell 2000 has stolen the show with a gain of 4.60%, which belies the more important fact that it is up 12%(!) since its intraday low on Tuesday.

Why the rush to buy the market?  Well, aside from the understanding that the equity market holds tremendous long-term relative value at current prices versus Treasuries, European officials are talking the talk on bank recapitalization plans.  That realization has market participants walking the walk on the idea that the riddle that is European leadership will no longer be wrapped in a mystery inside an enigma when it comes to dealing with fending off a broader banking crisis.

Once again, we feel compelled to remind readers that talk is rich in an oversold market until it is proven cheap by a lack of actual action.  The strength of this week's rebound effort, though, suggests there is a glint of confidence that didn't exist before that all of the talk will finally lead to action in the near future that removes a worst-case scenario.

That thinking has led to a wave of short covering that has augmented this week's gains, although Moody's downgrading multiple financial institutions in the U.K. and Portugal, and murmurings that Germany and France are not on the same page yet in terms of the approach to recapitalization, serve as reminders that the risk of disappointment on the European front is still high.

On that note, we are pleased to report that the September employment report did not disappoint from a headline perspective.

Total nonfarm payrolls increased by 103,000 (Briefing.com consensus 60,000).  They were held back by a 34,000 decline in government positions, primarily at the local level, but were propped up by the return of 45,000 telecommunication workers who had been on strike in August.  Nonfarm private payrolls were up 137,000 (Briefing.com consensus 83,000).

In addition, there were upward revisions to nonfarm payrolls for July (from 85,000 to 127,000) and August (from 0 to 57,000) that also came as a welcome surprise.

The unemployment rate held steady at 9.1%.  That won't play well politically, but it does suggest that those who entered the labor force found positions.  The caveat there is that many of the positions were likely low paying as evidenced by the uptick in the "real" rate of unemployment to 16.5% from 16.2%, which accounts for unemployed and underemployed individuals.

Positive labor market indications were found, however, in the uptick in temporary help positions (+19K), the 0.1 increase in the average workweek to 34.3 hours (Briefing.com consensus 34.2), and the 0.2% jump in hourly earnings (Briefing.com consensus +0.2%).

Still, there is a clear problem in getting people back to work, as workers unemployed for 27 weeks or more accounted for 44.6% of the unemployed versus 42.9% in August.

The September employment report was essentially better than feared, which is consistent with most of the economic data seen of late.  That understanding has put a healthy bid in the S&P futures, which are up 10 points and trading 0.7% above fair value.

We still need to see stronger job growth to get the unemployment rate down and to boost consumer confidence, but this report fits more with the notion that the U.S. economy is in a low-growth mode than it does with the inflammatory claims by some that we have already tipped into another recession.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.