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Posted at 10:22 AM ET, 02/ 4/2011

9%?

By Derek Thompson

The unemployment news today is a mess. The news is bad. The data are downright mystifying.

The unemployment rate dropped to 9%, down from 9.8% just two months ago. That's the largest two month decline in unemployment in 60 years. It sounds pretty wonderful ... until you see that the private sector added only 50,000 jobs. We need three times that many just to keep up with population growth. The huge discrepancy appears to come from a drop in the workforce total due to a population adjustment. My advice is: Don't sweat the methodology, do sweat the anemic job creation.

Beyond the funky data, this report is much like almost every report for the last year. There are bright spots, there are dark spots, but mostly there is stasis. Total employment is at May 2010 levels.

Where is the good news coming from? Back over at my regular digs, Daniel Indiviglio identified the fastest growing supersectors according to BLS data. Three industries stand out. Mining is growing at the fastest rate, thanks to booming global demand for commodities. Health care has been adding the most jobs overall, thanks to relentless investment from the government driving both demand and supply. And manufacturing has enjoyed a surprising burst, thanks perhaps to healthy foreign demand for high tech and capital goods.

Where's the drag? State and local governments are waking up to a hangover as the stimulus dries up, while construction continues to suffer from their boom-time bender. Last month, those two sectors shed nearly 50,000 jobs -- the same number added by the entire private sector.

There are reasons for optimism. Our largest corporations have cash to hire. The stock market is rising and making families feel richer. Consumers are starting to break out their wallets. But when jobs in local governments and construction are falling as fast as the entire economy is growing, you know you still have a ways to go.

Derek Thompson is an associate editor at The Atlantic, where he writes about economics, business, and technology.

By Derek Thompson  | February 4, 2011; 10:22 AM ET
 
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Comments

Derek, that is wrong. The population adjustment did not affect the unemployment rate (as reported) at all.

According to the BLS report on the household survey, if you take out the population adjustment (which you need to do to accurately compare to the non-adjusted December numbers), the number of employed went up by 589k, the number of unemployed went down by 589k, and the labor force didn't change at all.

In other words, far more people answered the household survey this month as "employed" than last month. This should not be swept under the rug. We have two different surveys (payroll and household) showing two completely different numbers (589k vs. 36k). Not because of a methodology change -- those are just different numbers from different surveys.

Posted by: JonShields1 | February 4, 2011 11:26 AM | Report abuse

"The huge discrepancy [between net job growth and unemployment] appears to come from a drop in the workforce total due to a population adjustment."

I don't think that's correct - the population adjustment reduced employment and the labor force by a similar amount.

There was a gain of 117,000 jobs in January per the household survey, which presumably would have been 589,000 without the adjustment. That's 0.38% of the labor force, and that's what drove the unemployment rate sharply lower. The real discrepancy is betwen a large job gain in the (volatile) household survey and a small gain in the (stable) establishment survey.

Speaking of volatility in the household survey job creation numbers, averaging in the 472,000 unadjusted gain in January with the previous three months and monthly job creation has only been running at a 75,000/mo pace, which is much more consistent with the 105,000/mo pace over the same time period in the establishment survey.

"To show the impact of the population adjustment, however,
differences in selected December 2010 labor force series based on the old and new population estimates
are shown in table B. The adjustment decreased the estimated size of the civilian noninstitutional
population in December by 347,000, the civilian labor force by 504,000, and employment by 472,000;
the new population estimates had a negligible impact on unemployment rates and most other percentage
estimates."

http://www.bls.gov/news.release/pdf/empsit.pdf

Posted by: justin84 | February 4, 2011 11:29 AM | Report abuse

Jon:

I agree with you that the numbers don't make any sense. Derrick doesn't know anything about alternative energy, but he's also right that we're all scratching our heads.

Essentially people who are actively looking for work found it at a higher rate, but almost nobody started searching for a job who wasn't already doing so.

The only way I think it matters is as a danger for the president. A slow steady drop in the rate would have been far preferable to a huge dip followed by bumping up and down.

Posted by: johnmarshall5446 | February 4, 2011 11:33 AM | Report abuse

To make further progress in rapidly reducing the rate of unemployment it is imperative NOT to extend payments to the unemployed. This is the only safe way to keep the statistic on the right track.
Politicians and pundits attempt to make us believe that the unemployment problem is solved hailing government’s statistic as prove. I for one look at the number of full and part time employed and that number stinks!
The fact is while 36,000 Americans found jobs about 600,00 dropped out of the work force because they cannot find jobs. Therefore, the unemployment is up very significantly and the statistic released by the government is meaningless.

Posted by: west129 | February 4, 2011 11:44 AM | Report abuse

"The stock market is rising and making families feel richer."

Which of the following families do you refer?

http://robertreich.org/post/3059852705

It’s simply wonderful, especially if you’re among the richest 1 percent of Americans who own more than half of all the shares of stock traded on Wall Street. Hey, you might feel chipper even if you’re among the next richest 9 percent, who own 40 percent.

But most Americans own a tiny sliver of the stock market, even including stocks in their 401(k) plans.

Posted by: lauren2010 | February 4, 2011 11:46 AM | Report abuse

lauren:

Yes BUT, that is the failure of our education system which has our children learning British literature, but not American business.

Being an LA major myself, I sympathized with my high school child who just recently had to read "The Heart of Darkness". However from me she also knows why commodity prices go up and down, and that the dollar is a variable not a rock.

The level of financial education in schools is about where it was 120 years ago, but the children in it are even less knowledgeable than their ancestors because those children were thrust into the business world at a very early age.

Posted by: johnmarshall5446 | February 4, 2011 11:54 AM | Report abuse

The positive news here is that most people only pay attention to the reported unemployment number and not all of the numbers behind it. The fact that it fell to 9% will give the average consumer and business owner more confidence in the economy, even if the numbers behind that 9% are less positive.

The psychological effect of the reported unemployment rate falling can have a huge positive impact on the economy.

Posted by: DeanofProgress | February 4, 2011 1:10 PM | Report abuse

For people who pay attention,it appears that these numbers are just made up. Event the U6 rate dropped and that cannot represent the actual number of unemployed. People are considered to not be looking for work once the 99 weeks of benefits stops. This creates a false sense of progress while the bottom is rotting out of our labor market.
If congress were to pass an extension of benefits for people over 99 weeks even for 4 weeks, you might see the numbers reflect reality. There must be a better way to calculate unemployment. How did they count it in the Great Depression?
I have no confidence in these numbers and no one else should either.

Posted by: EducatingTheFools | February 4, 2011 1:24 PM | Report abuse

"... the private sector added only 50,000 jobs."

"Our largest corporations have cash to hire.The stock market is rising..."

Is anyone going to point out where the problem obviously lies?

No.

Posted by: rwgreene | February 4, 2011 1:31 PM | Report abuse

It all perfectly fits into the Obama/Biden plan, which is 'if we keep this Obama economy going [down] long enough, people will just stop looking for jobs and the unemployment numbers will go down.'

But then that's what you get when you elect a community organizer for President (and a walking gaff machine for VP).

THINK before you vote...think BEFORE you vote...not after.

Posted by: flintston | February 4, 2011 1:42 PM | Report abuse

Having cash on hand is no reason to hire or not hire people. I hire additional people when the market for my products or services increases AND (very important) I want to take advantage of that increase to grow my business. If the demand for what I make has not ticked up, or I perceive the demand to be soft (unpredicatble or not sustainable), or, I just don't want to expand right now (say, because government has huge bodies of new regulation floating aorund that may end up sapping the profits of any growth I make), then I may not hire new employees. I have more often hired when I DID NOT have a large amount of cash-on-hand because my payroll is driven by jobs I acquire and will receive cash for in the future.

Besides, companies are free to do with their cash as they wish or otherwise see fit. They are under no dictate to spend it on new employees or anything else for that matter. This is not Russia.

Posted by: flintston | February 4, 2011 1:56 PM | Report abuse

National unemployment statistic is entirely misleading

There may not be a bigger joke running than the monthly unemployment figure released by the United States Labor Department. Look no further than the January, 2011 number announced today to reinforce this notion.

http://philiptortora.blogspot.com/2011/02/national-unemployment-statistic-is.html

Posted by: philtortora | February 4, 2011 2:25 PM | Report abuse

flinston wrote:

"THINK before you vote...think BEFORE you vote...not after"

In your case, think before you write would be an equally good nostrum.

Posted by: johnmarshall5446 | February 4, 2011 3:12 PM | Report abuse

@EducatingtheFools:
"People are considered to not be looking for work once the 99 weeks of benefits stops. This creates a false sense of progress while the bottom is rotting out of our labor market."

That's not accurate. People are considered to not be looking for work if they check the box that says 'not looking for work' as opposed to the box saying 'currently looking for work'.

It is true that a very high percentage of people apparently stop looking for work right when they stop getting weekly checks that are dependent on them being able to claim they are seeking a job. Economists have no explanation for this statistical anomaly.

(PS: the number of people who said they gave up looking for work because they couldn't find a job also fell by half a million last month)

Posted by: eggnogfool | February 4, 2011 4:43 PM | Report abuse

I did, and I also before I voted.

Posted by: flintston | February 4, 2011 4:52 PM | Report abuse

eggnofool:

So what do you make of this month's perplexing report? I would be interested in your opinion.

Posted by: johnmarshall5446 | February 4, 2011 9:39 PM | Report abuse

@JohnMarshall:

A few things I see:
(1) Government, construction, and financial sectors downsized. Them's the post-boom breaks. When three of the major sectors of your economy are being dragged down to the depths, it is hard to see big growth in jobs.

(2) There was a ton of "job growth" in a way: household data shows an increase of 130K jobs, while there were 600K fewer part timers. That means 730K more full time jobs. That's huge; one of the major reasons our job growth has been so poor is that there is a ton of 'slack' in our economy, including a massive excess of part-time employees who can fill demand for additional workers by working additional hours. You won't see real job growth while demand can be met without hiring new employees.

(3) There were something 700K people applying for UE benefits a month 99 weeks ago. Many of those people have run out of benefits, but many of them decided months or years ago that they didn't really want to go back to work. Their nominal 'job hunts' ended when their benefits did.

Posted by: eggnogfool | February 5, 2011 1:55 PM | Report abuse

Too Much Egg Nog, fool. Sheesh. #3? Put down the ladle and step away from the bowl. Have you ever been unemployed? Do you know ANYONE that is currently unemployed? Have you ever had to go longer than one week or two with ZERO income?

And, to the author, you're as dense and disaffected as EZ, no matter how many times we've asked him to use whatever connections in the bltwy he has to LOUDLY address the 99ers and the overall unemployment benefits travesty. It's downright sadism now. Gooslbee and Biden only rub it in: "Yeah, "we" know how tough it is." "Yeah, when we get some jobs created things will get better. Just hang in there."

I don't care where you got your education or where you edit or write for a living. You are in collusion with every single blogger, author, politician, bloviator on any network, et al who REFUSE to DEMAND Washington get Unemployment on the front page every daggone day and INSIST on true answers about the delays, the teases, the last-second "attempts" for extensions when Congress is halfway home already to another extended break. These (we) are MILLIONS without one cent for a year or more now. Each new day more drop from the rolls. These latest statistics are genuine 100% nonsense. They're without any way to substantiate them. One party, and its pilot fish, does nothing to earn their salary except obstruct, non-legislate, and waste time on repeal machinations. The other party has no gumption, absolute sissies. And there are MILLIONS of former middle class Americans, newly dumped behind the dung gate, NO ONE will pay any attention to. You had a platform, you blew it off. Thanks.

Posted by: kickoradell | February 6, 2011 4:51 PM | Report abuse

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