The U.S. Labor Department on Friday answered few questions when it delivered mixed results in its first reading of the 2011 job market.
First, the good news: the unemployment rate dropped last month to 9.0 percent, the lowest level in nearly two years.
Now, to the bad: the economy created just 36,000 new jobs, the fewest in four months.
The January report shows how job growth remains the biggest hurdle in the American economic recovery efforts.
“The biggest issue here is that while we have seen growth over the past 18 months, it has been so inconsistent,” said Jill Schlesinger, editor at large at CBS/MoneyWatch, in an interview with Marketplace Morning Report. “When you look back over almost any three month period, you can’t find three consecutive months where we’ve had robust growth, where we’ve seen great demand from consumers and from businesses.”
The unemployment rate fell because the Labor Department’s household survey determined that more than a half-million people exited the labor pool. The department conducts a separate survey of businesses’ hiring activity, which was weak in January. And the two surveys sometimes reveal contradictions.
“Sometimes these numbers get distorted because if people just stop looking for work, they’re not included in the labor pool and that can push down the unemployment rate, but not for the right reason,” Schlesinger said.
In January, about 2.8 million jobless workers were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. About one million of those people said they are not currently looking for work because they believe no jobs are available to them. The remaining cited reasons such as school attendance or family responsibilities.
The manufacturing and retail industries increased their hiring activity last month, but employment declined in construction and transportation sectors. Severe winter weather may have contributed to the construction losses, at least in some parts of the country hit with snow storms, the Labor Department said.
Hiring activity in most other major industries didn’t change much over the month.
Some analysts say despite the tepid job growth, the public perception about the market just might change — because of the lower unemployment rate.
“Brian Williams will report tonight that the jobless rate fell, and Katie Couric [will report it dropped] to 9 percent from 9.4 percent, and the public will feel better as a result,” said Anthony Crescenzi, an executive vice president, market strategist and portfolio manager at bond firm Pimco.
If Americans feel more upbeat, there’s a better chance they’ll go out and hunt for jobs. That, of course, could push up the unemployment rate in the coming months.
“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,” said Gus Faucher, economist for Moody’s Analytics.
He says that’s a good sign, though. Most would agree a little confidence never hurts, even when reality is a little blurry.