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Payrolls inch up while jobless rate plumments

By LUCIA MUTIKANI
February 5, 2011

Unemployed: Numbers still growing

Employment rose by a meager 36,000 jobs in January, far less than expected, as severe snow storms slammed large parts of the nation, but the unemployment rate fell to its lowest level since April 2009.

Despite the conflicting signals in the Labor Department’s report on Friday, economists agreed a job market recovery was proceeding apace if not gaining speed. Many investors also saw the data as a sign of strength. Government bonds sold off, while the dollar rallied against the yen and the euro.

The payrolls gain reported by U.S. employers was a quarter of the 145,000 gain economists had expected. But a separate household survey, which is used to determine the jobless rate, showed nearly 600,000 more people reported they were employed.

That surge pushed the unemployment rate to 9 percent from 9.4 percent in December. It has dropped 0.8 percentage point since November, the biggest two-month decline since 1958.

“The payroll details and the drop in unemployment signal that there is an underlying improvement in the labor market buried under the snow and ice,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

Still, the decline in the jobless rate is unlikely to discourage the Federal Reserve from completing its $600 billion government bond-buying program to support the economy.

Fed Chairman Ben Bernanke on Thursday sounded a more upbeat note on the economy, but said “it will be several years before the unemployment rate has returned to a more normal level.”

Economists estimated that blizzards, which pounded the Northeast in January and buried cities in knee-deep snow, reduced payrolls by between 50,000 and 100,000.

Signs of underlying strength in the labor market were also yielded by revisions to November and December payrolls, which showed 40,000 more jobs created than previously estimated.

The U.S. Treasury debt sell-off pushed the spread between two-year yields and 10-year yields to an 11-month high. Stocks on Wall Street were little changed in mid-afternoon.

JOBS MIGHT BE UNDERSTATED

Though the Labor Department’s payroll count continues to show moderate growth, independent surveys have suggested a pick-up in the pace of job creation, raising concerns that the government might be missing growth coming from new businesses.

Labor Department chief economist Betsey Stevenson told reporters the count was likely falling short, just as faulty estimates of how many companies were created or destroyed led to an understatement of job losses during the recession.

“It’s a challenge for the establishment survey to be able to accurately record the number of businesses that are starting up and the number of businesses that are shutting their doors,” Stevenson said.

“Now that we are in a recovery it’s most likely, but we won’t know for sure until next year, that we are missing a lot of businesses that are opening their doors and that we’re over estimating the number of business that might be shutting their doors.”

The labor market’s recovery has lagged the broader economy, which grew at a 3.2 percent annual rate in the fourth quarter. Getting the job market on a solid growth path is critical for President Barack Obama who faces re-election next year.

The head of the White House Council of Economic Advisers, Austan Goolsbee, told Reuters Insider the employment report showed “continued progress but it’s not fast enough.”

A Labor Department official said the household survey found that 886,000 Americans had been kept home by the heavy snowstorms, roughly double the number who are snow-bound in a typical January.

Still, the separate survey of establishments counts someone as employed even if they worked only one hour during the survey period.

Economists said the data, excluding the weather effect, was consistent with economic growth above 3 percent. They will be watching to see if the drop in the jobless rate is sustained.

If it is “it will be a further signal that underlying job growth is stronger than reported and conditions in labor markets are better than advertised by the establishment survey,” said Michael Gapen, an economist a Barclays Capital in New York.

Last month’s drop was encouraging because it reflected more people finding work. In recent months, a large portion of the decline in the jobless rate had reflected people giving up the search for work, meaning they were no longer counted among the ranks of the unemployed.

WEATHER HITS CONSTRUCTION

A broad measure of unemployment that includes workers who want a job but have stopped looking and those working part time for economic reasons dropped to its lowest level since April 2009. The number of long-term unemployed also fell.

Last month, the private services sector added only 32,000 jobs after increasing 146,000 in December. Payroll increases in goods-producing sectors rose 18,000, with manufacturing recording its largest gain since August 1998.

Severe weather hit construction payrolls, which dropped 32,000 last month. There were also large declines in the employment of couriers and messengers.

Government payrolls dropped for a third straight month, pulled down by state and local governments.

Copyright © 2011 Reuters

13 Responses to Payrolls inch up while jobless rate plumments

  1. Almandine

    February 5, 2011 at 10:37 am

    This article is completely bogus. Jobs growth was revised DOWNWARD for the end of 2010. Over 500K workers left the workforce (stopped looking for work) to
    create the 0.4% decrease in unemployment. Average time of unemployment is higher than ever.

    http://wallstreetpit.com/60433-did-snow-freeze-job-growth-last-month

  2. Fivebyfives

    February 5, 2011 at 11:03 am

    “Passengers of the Titanic, this is your captain speaking. So we hit an iceberg; we’re taking on water and some say we’re going to sink. But fear not, for according to the calculations of my experts, the more water we take on, the faster we’ll go.

    Therefore, if this ship should actually sink, then we’ll be in New York before you know it.

    And please pay no attention to the lifeboats carrying away the richest 5% of our pasengers. They have every confidence that we’ll be fine. Trust them.”

    Signed,

    Captain Pinocchio Obama

  3. eve

    February 5, 2011 at 12:39 pm

    More “fudging” of the numbers to support their position/view.

    Like Iraq had WMD’s.

    The boy has cried “wolf” one too many times.
    They can lie with impunity, indefinitely and there’s no consequence?
    Sign “free trade” agreements which have removed 42, 000 + jobs from the US (ask yourselves HOW is this good for the US) while allowing immigration to remain a “wide open” issue.
    How is this good for the US?
    It’s time to ask ourselves if those who supposedly “represent” us are intentionally trying to destroy this nation.
    Incompetence is not an answer that fits the question of “why?”

    Oh, and some senators want to extend the Patriot Act indefinitely:

    http://thehill.com/blogs/floor-action/senate/142143-senate-split-over-how-to-extend-patriot-act-surveillance-authorities

    Pass it along, Americans need to know.

  4. eve

    February 5, 2011 at 12:40 pm

    Apologies, my post should have read 42,000+ factories, not jobs. Factories.

  5. b mcclellan

    February 5, 2011 at 1:31 pm

    So, when will our walk like an Egyptian moment arrive ?

    • griff

      February 5, 2011 at 10:30 pm

      As soon as the Bangles reunion tour swings into town. Ha.

      Soon, I fear.

  6. woody188

    February 5, 2011 at 2:34 pm

    Of course we only need 300,000 net jobs added per month to keep up with population growth.

    I’ve heard tell of a college bubble that’s soon to pop. There are so many “educated” people looking for work, people with bachelor and masters degrees, some are saying it would be better to skip college and all the debt and go for experience if you can get hired on. Some are calling degrees fiat education, ie not worth the paper they are printed on.

    Anyone else heard of this?

    • Almandine

      February 5, 2011 at 2:41 pm

      How many times?

    • griff

      February 5, 2011 at 10:35 pm

      There was once a time, not long ago, when kids that didn’t want to go to college could get a job in a factory or other trade, work for forty years or so, raise a family, and retire with a good pension.

      College isn’t for every one. Not every one wants to be a Wall Street rapist or corporate executive. Some folks aren’t cut out for it.

      The backbone of any healthy, prosperous society is the working class, the producers. Just about all that’s left is the casino economy and menial service jobs.

      Unless you’re a Wall street rapist or corporate executive, of course.

      • b mcclellan

        February 5, 2011 at 10:43 pm

        What’s yer handicap,
        or is it theirs ?

        • griff

          February 5, 2011 at 10:49 pm

          I work for a living.

      • Carl Nemo

        February 5, 2011 at 10:55 pm

        Good point Griff. I regularly advise youngsters soon to graduate from high school to look for alternative professions in lieu of college.

        I’ve helped quite a few move on to injection molded plastics design, MRI specialists, CNC machinists, auto and cycle mechanics, HVAC maintenance, the electrical trades including utility linemen etc. They’re so brainwashed that college is the only path, but once I have a sitdown and explain the ropes of life in these times a few see the light and have moved on a path to future success. It’s amazing as to how many young folks in Starbucks have Masters degrees and can’t find work within their field of choice so become perpetual students while working at SBUX due to the medical benefits etc. ..? : O

        Of course too, I encourage them to consider the USN, Coast Guard or Air Force as a career choice post high school. Granted we need the Army and Marines, but they are notorious for doing a ‘bait and switch’ on the youngsters; ie, they sign up for a particular specialty then get side-tracked to the motor pool so to speak having little to show for their enlistment. The reason being is that the mentality of the these two services are you are always a combat infantryman or marine first with your specialty second when in a combat zone and even in some HQ situations stateside. Your specialty comes second, whch makes sense of course if your position is being overrun by the enemy. : |

        Carl Nemo **==

  7. b mcclellan

    February 5, 2011 at 4:57 pm

    Will the hard knocks grads, please stand up.
    Yeah, you with the dirt under your nails.
    Now please recalibrate your pity meters while the over educated
    and under trained steal your jobs on the basis of a skewed paper trail.
    Hack..