Friday, February 4, 2011

January Jobs Created 36,000 - Falling Short of Consensus by Over 100,000 but Unemployment Rate Plunges to 9.0%

This is the 3rd straight month of very strange data - each of the past 3 months has been a disappointment on job growth in the absolute but the past 2 months have seen sharp drops of 0.4% in the unemployment rate - this number has fallen from 9.8% to 9.0% in just 2 reports.  This is because we are talking 2 separate reports, each one speaks to a different figure.  For general public consumption (i.e. what the politicians talk about) the unemployment rate  is all that matters so the conspiracy theorists can begin the talk of how the unemployment rate has dropped 0.8% while only some 150,000 jobs have been created the past 2 months (officially).

Transportation (-38K) and construction (-32K) were the 2 weak links in January, so that can be blamed on the snow of course if you are glass half full.  But even with those reversed back to zero (+70K) the official job creation would have fallen far below consensus.

The household survey (which accounts for the unemployment rate) seems to indicate a lot of people are becoming self employed which is why the unemployment rate seemed to drop so sharply.  (for example, if you start an Ebay business, to hawk stuff online - you would be 'employed' per the household survey) Perhaps this is what skewed the job creation figure this month, as it surveys traditional businesses rather people starting their own business. The labor force participation rate was unchanged at 64.2% - this is far below the historical rate, but at least did not drop even further.

Wage growth jumped nicely from +0.1% to +0.4% but the workweek dropped by 0.1 to 33.4 hours which is a negative.

As always if you are not actively seeking work for 4 weeks in America, you are no longer unemployed per government statisticians.

Probably the most important point - the annual benchmark revisions that come out each January were released today, and (as usual) the jobs created in 2010 were overstated by 378,000.  Which makes our overreaction to each month's data as gospel, laughable.  Whatever we see today or the next 10-11 months will be revised to a substantial degree in January 2012...

The market sunk initially when the 36,000 job figure was announced, but bounced quickly a few seconds later when the unemployment rate was mentioned.

Updated chart per Calculated Risk blog

BLS release here.

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