Wall Street Journal article summary: “Job Report Muddies Outlook”
February 5, 2011
Even though unemployment fell to 9% from 9.4% – the lowest level in nearly two years –there are still concerns that January’s meager job growth will be the trend for 2011. The government’s broad synopsis of the job market showed payrolls ticked up to only 36,000 in January, much less than the 200,000 needed to maintain growth.
Despite the moderate pace of job creation, the drop in the unemployment rate signifies fundamental strength in the job market. Supporting this projection are other strong indicators that have pointed to an economy slowly gathering momentum, but many investors have discredited these reports, saying it was too difficult to draw conclusions from the numbers. The Dow Jones Industrial Average rose 29.89, to close at 12092.15. Treasury prices lost ground, showing signs that some saw the employment report as an indicator of a strengthening recovery.
January brought along a string of bad weather that had a very powerful and negative influence on job growth. Some estimate that without the heavy snow that took place, there would have been 150,000 addition jobs in January.
Hire Dynamics, an industry leading staffing and recruitment firm headquartered in Duluth, Ga., saw its business decline following the Jan. 9 snowstorm that shocked much of the Southeast.
Chief Executive Dan Campbell said it basically took Atlanta down for a week – most businesses were down at least two business days and a large percentage of companies were down all week. But the next week, Campbell said business bounced back even further.
But that bounce back wasn’t exposed in the employment report. To get these numbers, the Department of Labor (DOL) asks companies how many workers are on their payroll during the pay period of the 12th of and if they didn’t work during that pay period, like many who work for Hire Dynamics, they didn’t count. The DOL said that employment by staffing agencies like Campbell’s fell by 11,000, after totaling an average of 25,000 a month in 2010. The snowstorm could have been a factor in the loss of 32,000 jobs in the construction sector and 38,000 jobs in transportation and warehousing in January. Private employers added 50,000 workers, while governments dropped 11,000.
The deviation between job creation and the unemployment rate is due to how the two targets are calculated – unemployment is based on household surveys rather than employers, so people who missed work because of weather are counted as employed regardless of whether they were paid for the time off. Because the government surveys far more companies than households, economists view the payroll figures as a more accurate measure than the unemployment rate.
In addition, the DOL uses updated Census Bureau data to recalculate population statistics every January and this year those numbers were curiously large. That makes it uncertain as to how much the shift lower in the unemployment rate occurred last month and how much happened at the end of 2010.
While part of the drop in the unemployment rate was due to more people finding work, another fraction was a result of people exiting the work force. The share of the population over 16 years old either working or actively looking for work fell to 64.2% in January, the lowest level since 1984, when far less women were in the work force.
A positive is manufacturing employment which continued to climb in January, adding 49,000 workers and accounting for the biggest monthly increase since 1998. Demand has picked up, and after running into problems with excess inventory during the downturn, more retailers are trying to shorten their supply chains by buying American-made goods. A problem that many manufacturing companies are facing is finding qualified workers, which is the result of decades of declining factory employment in the U.S.
January job reports included annual modifications to the payroll data based on a more complete count of unemployment insurance records, indicating the economy lost even more jobs during the downturn that previous reported. The new data showed that as of last March, the economy lost 8.74 million jobs since the beginning of the recession in December 2007, compared to 8.31 million before the revision.
Since March, 827,000 jobs have been added.
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