The unemployment rate fell by 0.4 percentage point to 9.0 percent in January, while nonfarm payroll employment changed little (+36,000), the U.S. Bureau of Labor Statistics reported today. Employment rose in manufacturing and in retail trade but was down in construction and in transportation and warehousing. Employment in most other major industries changed little over the month.
Let's go to the data, starting with the household survey:
Interestingly enough, the civilian non-institutional population decreased from 238,889 to 238,704. This is basically the entire population of people who could be working, save those not in prison or in the military. So in January, the largest population group used in BLS calculations decreased. This is, frankly, a bit odd.
The civilian labor force decreased by 504,000 (153,690 to 153,186). This is the denominator in several important calculations. However, the total number of unemployed also decreased by 622,000 (from 14,485 to 13,863). This makes a large percentage of the drop from 9.4% to 9% a legitimate drop in the unemployment rate.
Also, expect to hear about the "not in the labor force" number which increased from 85,199 to 85,518 or an increase of 319,000. Before we start hyperventilating, let's remember the definition of the word:
Persons who are neither employed nor unemployed are not in the labor force. This category includes retired persons, students, those taking care of children or other family members, and others who are neither working nor seeking work. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching.Remember -- we're seeing the beginning of the baby boomer retirement now. This will have a profound impact on employment numbers going forward.
Finally, the number of employed increased from 139,206 to 139,323, or an increase of 117,000.
So, the household report shows a large decline in both unemployed and the civilian labor force, making the drop in the unemployment rate a legitimate drop.
Looking at the establishment report, we see the following.
Goods producing industries added 18,000, with the drop in construction (32,000) offset by an increase in manufacturing (+49,000).
Private services increased by 32,000. There was a dearth of hiring in all industries and a surprise drop in transportation and warehousing (-38,000).
Average weekly hours decreased (34.3 to 34.2), but average hourly earnings increased from ($22.78 to $22.86). The decrease in hours is concerning, as there is already a tremendous amount of slack in this number which needs to be absorbed before we see job creation pick-up.
However, the increase in earnings was large enough to offset the decrease in hours, sending average weekly earnings higher ($781.35 to $781.81).
Overall, I'd give this report a 3.5 on a 1 to 10 scale. While the drop in the unemployment rate is encouraging, it's not due to job creation, but the beginning of the baby-boomer retirement wave. In addition, total hours worked is still low, meaning employers have a fair amount of slack they can take up before adding to payrolls.
