Gus Faucher: Despite January dip, unemployment could grow this year

Demonstrators carry signs as they stage a protest demanding government action to create jobs.

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JEREMY HOBSON: Alright, let's get some analysis now from Gus Faucher, an economist at Moody's Analytics. He's with us live. Good morning.

GUS FAUCHER: Good morning.

HOBSON: So do you think that's true -- that tonight on the news the newscasters are going to say the unemployment rate fell to 9 percent and everybody's going to feel good?

FAUCHER: Well to be honest with you I'm an economist and not a psychologist, so I can't tell you how people are going to respond. What I do know is that the numbers were disappointing. The reason that the unemployment rate fell is that a lot of people gave up looking for work probably because they're discouraged, and then the separate survey of employers found that the economy only added about 36,000 jobs or so. And that was very disappointing because we were expecting something closer to 160,000.

HOBSON: So does that mean in the coming months, as people -- these discouraged workers you talk about -- come back into the labor force, that the unemployment rate is just going to skyrocket?

FAUCHER: I think the unemployment rate is going to move higher of the first half of this year because we are going to have the millions of people who lost their jobs and have quit looking for work -- as the economy gets better they're going to come back into the labor market. So if the unemployment rate does move higher in early 2011, I take that as good sign and not as a bad sign.

HOBSON: And finally Gus, I mean did you see any sector of the economy that looks particularly good in this report?

FAUCHER: Manufacturing added a lot of jobs. The manufacturing indicators were very positive for this month, and that's a sign that consumers are spending more, that the economy is strengthening.

HOBSON: Gus Faucher, economist at Moody's Analytics, thanks so much for your time this morning.

FAUCHER: Thank you.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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