Paltry Job Gains Not Keeping Pace with Economy
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Paltry Job Gains Not Keeping Pace with Economy

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Despite a flurry of positive economic signs and a drop in the unemployment rate to 9 percent, employers added a mere 36,000 jobs in January, far below economists’ predictions of 160,000, according to the Bureau of Labor Statistics. Severe weather may have played a role in the disappointing job number.

By contrast, employers added 136,000 jobs in December. Economists suggest growth of 200,000 to 300,000 jobs a month or more is typical in strong economic recoveries.

The sharp decline in the unemployment rate to 9 percent from 9.4 percent in December is the lowest level since April 2009.

“There is no good news in today’s numbers.  The
unemployment rate dropped because a half million
Americans simply stopped looking for work.”

Among the 13.9 million unemployed Americans, more than 43 percent had been jobless for 27 weeks or more in January, according to BLS. When unemployed persons stop looking for work, the government no longer considers them unemployed. 

“Let’s be honest: There is no good news in today’s numbers,” said Rep. David Camp, R-Mich., chairman of the House Ways and Means Committee. “The unemployment rate dropped because a half million unemployed Americans simply gave up and stopped looking for work – not because they have found a job.”

The sharp decline in the labor force participation rate could also be weather related, said Sophia Koropeckyj, economist with Moody’s. “Many of the companies that would be hiring were hindered by the weather and many job seekers stayed at home,” she said. ”This seemingly discouraging figure should also be interpreted with caution. The weak top-line number should not raise concerns about the recovery.”

Paul Ashworth, economist with Capital Economics, noted the government report said approximately 886,000 were unable to work last month because of the weather, more than double the January average.

The relentless snow and ice storms have pelted as many as 30 states and affected some 100 million people, the Weather Channel estimated. If the winter weather blasts continue or become more severe, as is widely expected, they will take their toll on the economy. Already the continuous blizzards have cost retailers $1 billion in sales, according to the National Retail Federation.

“The weather has been hostile to spending on Main Street, further depressing job creation,” said William C. Dunkelberg, chief economist for the National Federation of Independent Business. “The small business sector continues to underperform on job creation in this recovery compared to other recovery periods.”

Only 950,000 of the 8.7 million jobs lost have
been recovered — not 1.1 million as originally reported.

One bright spot in the monthly report was manufacturing, which saw gains of 49,000 jobs, the highest since 1998. The retail trade rose by 28,000 jobs in January. Ford Motor Co. recently announced it was adding a second shift at its Chicago assembly plant, which would create 1,200 jobs.

The battered construction industry took another hit in January with 32,000 job losses, the most since May. It was difficult for crews to work during the harsh storms. Transportation and warehousing industries also saw job losses. 

The BLS revised the numbers for 2010 and said there were 483,000 fewer jobs created last year. Before the revisions, the estimates suggested that over the past year 1.1 million of the 8.3 million jobs lost during the recession had returned, Ashworth said. “Now it appears that only 950,000 of the 8.7 million jobs lost have been recovered,” he said.

“While labor market conditions are brighter than two years ago when the economy was hemorrhaging jobs, the job market remains in a deep slump for people who want to work but can’t find jobs,” said Chad Stone, economist with the Center on Budget and Policy Priorities, a Washington-based think tank. 

Despite the mediocre job gains in January, economists and policy leaders are optimistic about the economic outlook. “The overall trend of economic data in recent months has been encouraging, as initiatives put in place by this administration are taking hold, but there is still considerable work to do,” White House Chairman of the Council of Economic Advisers Austan Goolsbee said in a statement.

Yesterday the Labor Department launched a new website dubbed “My Next Move,” aimed at helping first-time job seekers.  Earlier in the week, the White House announced a string of new initiatives, collectively called the ‘Startup America’ program, designed to spur entrepreneurship and create jobs.

In a rare press conference at the National Press Club Thursday, Federal Reserve Chairman Ben Bernanke said he expected "a more rapid pace of economic recovery in 2011 than we saw last year." Still, it will be several years before unemployment returns to more normal levels. “Employers are becoming more willing to hire. We’ll see lower unemployment rates soon,” he said.

Related Links:
Unemployment Drops to 9 Percent in January (NPR)
Economy Adds Fewer Jobs (Wall Street Journal) 
US Stocks Decline After Employment Report (Market Watch)