January’s Employment Situation Research Notes

by Jim Baird on February 4, 2011

Decline in jobless rate obscures limited job creation

The unemployment rate fell to 9.0% in January, its lowest point since April 2009.  The increase in nonfarm payrolls was terribly disappointing, however, with only 36,000 jobs being created, well below the consensus expectation of nearly 150,000.

Overall job creation remains very disappointing, despite the positive signs that the broad economy is once again picking up steam.  There is a very conflicted story being told by the data, as the falling jobless rate shrouds what is a still challenging labor market.

The depth of job losses throughout the recent recession surpassed any in the post-WWII era.  This report marks the longest stint of the unemployment rate being elevated at or above 9% since record keeping began in 1948.

Improving corporate earnings and solid economic growth, along with accommodative policy and government stimulus, should bolster continued improvement on the employment front.  As the hiring outlook improves, the unemployment rate is likely to rise a bit before resuming its downward trend as discouraged workers who left the workforce polish up their resumes and begin actively look for a job again.

The bottom line is that the broad economic backdrop continues to trend in a manner that should be supportive of job growth.  The tipping point that will lead American businesses to ramp up their hiring efforts, however, remains frustratingly elusive.  The question of “when” job creation will accelerate remains unanswered and a meaningful impediment to consumer confidence.

Previous post:

Next post: