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Unemployment Falls to 9.0 Percent Amid Low Job Growth Unemployment Falls to 9.0 Percent Amid Low Job Growth Unemployment Falls to 9.0 Percent Amid Low Job Growth Unemployment Falls to 9.0...

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Economy / economy

Unemployment Falls to 9.0 Percent Amid Low Job Growth

photo of Katy O'Donnell
February 4, 2011

Updated at 9:30 a.m. on February 4.

The nation added only 36,000 jobs in January, its most anemic total in many months and far lower than most analysts had been expecting. 

Though the unemployment rate dropped from 9.4 to 9.0 percent, an unexpectedly big drop that brought it to its lowest level in nearly two years, the new report highlighted once again that the labor market remains the weakest link in the recovery.

 

The seemingly contradictory report results from the fact that the two key numbers come from separate surveys. The estimate of job creation comes from the government’s survey of business payrolls, while its estimate of unemployment comes from its household survey and is based on how people describe their job status. The two surveys often point in different directions, sometimes for long stretches.

However, analysts said the jobs report was almost certainly distorted by the impact of the huge snowstorms last month, which occurred in the same week that the government carries out its surveys. In its report, the Labor Department noted that the number of construction jobs dropped by 32,000, which it said may well have reflected the bad weather.

In general, forecasters believe that hiring is poised to accelerate because other measures of business activity and confidence have been climbing over the past two months. A leading private survey of business payroll by Automatic Data Processing and Macroeconomic Advisers estimated on Wednesday that private-sector payrolls jumped by 187,000 jobs in January.

On average, forecasters had been predicting a job gain in January of about 150,000, up from the relatively weak increase of 103,000 jobs that the Labor Department initially reported for December. The drop in the unemployment rate to 9.4 percent in December from 9.8 percent in November was mainly the result of people leaving the work force.

There was some good news in the report. The Labor Department revised upward its estimate of net job creation for November by an additional 22,000 jobs and for December by 18,000 jobs. Still, that left the average gain for the past three months at just over 80,000 jobs -- an anemic pace that is too slow to keep up with increases in the adult population and far too slow to reduce unemployment.

Analysts estimate that the nation needs to consistently add at least 200,000 jobs a month in order to make a real dent in unemployment. The United States lost more than 8 million jobs in the past two years, and the work force has increased by more than a million jobs a year in the meantime. On top of that, several million other workers are either underemployed or have left the work force because they became too discouraged to look for work.

A number of indicators had pointed to a modest increase in hiring. New claims for unemployment benefits have drifted lower over the last month -- with 415,000 new claims in January reported by the Labor Department on Thursday -- and are nearing the level of 400,000 per week that analysts say points to a decrease in unemployment.

The Institute for Supply Management’s most recent survey of manufacturers reported a big jump in business expectations and in hiring expectations in particular. The report Friday found that in fact, manufacturing added 49,000 jobs, the most since August 1998.

On the other hand, labor productivity jumped at a surprisingly fast pace of 2.6 percent during the last quarter -- good news for corporate profits and long-term prosperity, but bad news for the struggling labor market.

Federal Reserve officials have repeatedly said that the pace of economic growth is still too low to generate substantial declines in unemployment.

“With output growth likely to be moderate for awhile and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,’’ Fed Chairman Ben Bernanke told reporters on Thursday in a speech at the National Press Club.

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