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Friday, February 3, 2012

Breaking Down the Labor Report

Good News

The LA Times details the good news coming out of this morning's jobs report:
The unemployment rate fell for the fifth straight month after a surge of January hiring, a promising shift in the nation's outlook for job growth.

The Labor Department says employers added 243,000 jobs in January, the most in nine months. The unemployment rate dropped to 8.3 percent from 8.5 percent in December. That's the lowest in nearly three years.

Employers have added an average of 201,000 jobs per month in the past three months. That's 50,000 more jobs per month than the economy averaged in each month last year.

In addition, as Calculated Risk predicted yesterday, there were revisions to past months employment data.
The change in total nonfarm payroll employment for November was revised from +100,000 to +157,000, and the change for December was revised from +200,000 to +203,000. The total nonfarm employment level for March 2011 was revised upward by 165,000.

Not So Good News

The Washington Post detailed, yesterday, the not-as-good news:
"On the face of it, a lower unemployment rate sounds good,” but the recent declines reflect not only an uptick in job growth but also the exit of thousands of potential young workers from the labor force.

When people stop looking for work, they are no longer counted as part of the labor force or “unemployed.” Evidence suggests that many of the young dropouts, who proved to be instrumental in Mr. Obama’s election in 2008, are continuing their schooling to avoid the tough job market and to increase their skills and chances of eventually securing employment.
The actual data shows this to be exactly what has happened (and at an increasing rate) as the population grew at a much faster rate than previously expected. As a result, according to the household survey, even though employment increased at an even faster rate than the payroll survey, there is a much larger portion of the population that is no longer in the labor force. In addition, looking at the details below.... it appears this is really having an increased affect not only on students, but especially on women (although employment among women jumped, meaning there are millions more women out there than previously thought... teen boys everywhere rejoice).

If they are all going back for more education, this should pay off over the long-run. If not, then the headline improvement in the labor market may be inflated.

Source: BLS