Good News Friday
Good News around the Edges 
February 5, 2010
Today’s employment report for January from the Bureau of Labor Statistics revealed a loss of 20,000 payroll jobs last month, a little below analyst expectations. But, paradoxically, the unemployment rate fell from 10.0 to 9.7 percent, also contradicting many analysts who expect unemployment to rise as discouraged workers reenter the labor force before it begins a sustained decline. What’s up with that? Payroll employment and the unemployment rate are derived from two different surveys. The Current Employment Statistics (CES) survey covers 140,000 business and government worksites to derive payroll employment, hours and earnings while the Current Population Survey (CPS) covers 72,000 households to derive unemployment and other characteristics of the labor force. The two surveys don’t always move in lockstep. Many analysts believe the household survey is better at capturing changes in the labor force early in a recovery because it includes the self-employed, which is an important source of employment as laid off workers start up new businesses. Here’s the good news from the household survey: The decline in the unemployment rate from 10.0 to 9.7 percent occurred even as the labor force increased by 111,000. So the decline was not because fewer people were looking for work. The number of employed persons rose by 541,000, and the number of unemployed persons fell by 430,000. The U6 measure of unemployment, which includes persons who have stopped their job search and part-time workers who would prefer to work full time, fell to 16.5 percent from 17.3 percent. The payroll survey brought some hopeful signs as well: The average workweek rose slightly to 33.3 hours from 33.2 hours while temporary hiring surged again by 52,000. This suggests that employers are giving their existing workforce more hours and relying on temps, both leading indicators of permanent hiring. The biggest drag on payroll employment came from a loss of 75,000 construction jobs, but the unusually cold weather across the U.S. last month could have thrown off the seasonal adjustment factor, meaning that the losses were overstated. Expect sporadic months of job creation in the first half of 2010 followed by sustained growth in the second half.
Bob Bach SVP, Chief Economist Grubb & Ellis