Jobs Report Disappoints Again, Signals Slow Recovery

Affected by harsh winter weather, the economy gained only 36,000 jobs in January.

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Net job change chart for July 2011

We always want the job market to get a good start in a new year, but this was particularly true for 2011. After months of disappointing gains—but gains nonetheless—a better-than-expected jobs report would have given the country a much-needed dose of optimism.

Unfortunately, that wasn't the case in January. Like the months before it, January disappointed, adding only 36,000 jobs, well below expectations of 150,000. And while the unemployment rate again dropped 0.4 percentage points, landing at 9 percent, economists say that figure isn't as positive as it sounds. Rather than stemming from job seekers finding positions, the decrease is due to a rise in the number of discouraged workers, or people who gave up on looking for work, as well as adjustments in population data.

"The unemployment rate falling, it's actually a negative for the economy," said Mike Englund, Chief Economist for Action Economics.

[See our graph showing job losses and gains over the last few years.]

Last month, when the Labor Department reported that 103,000 jobs had been added in December, some economists said estimates leading up to the report had been overly optimistic, and Americans shouldn't be too upset with the figures. But there was no hiding the disappointment this month over the January numbers.

"Everybody, whether they put a number on it or not, anticipated growth more robust than we've seen," says Patrick O'Keefe, director of economic research at accounting firm J.H. Cohn and former deputy assistant secretary at the U.S. Department of Labor. "Conditions are improving, but not improving sufficiently to begin to make real end-roads in the job losses that the economy suffered in the last couple of years."

Employment in most industries changed little in January. Manufacturing, retail, and healthcare added jobs, while construction, as well as transportation and warehousing, saw losses. Construction in particular, which shed 32,000 jobs, was likely negatively affected by several severe snow storms across the country.

Private companies added 50,000 jobs, but local, state, and federal governments lost 14,000.

The Conference Board called the minimal gains "chilling," a tongue-in-cheek reference to the negative effect of harsh winter weather. "The U.S. labor market remains unable to catch the recovery momentum of the broader economy," Bart van Ark, The Conference Board's chief economist, said in a statement. "We are still seeing only a slowdown in layoffs, not yet any significant pickup in hiring."

[See 11 Helpful Sites for Job Seekers.]

If there's any good news in the report, it's that the number of workers employed in the temporary help sector fell slightly, O'Keefe says. Temporary workers make up a small percentage of the labor force—about 2 percent of private employment—yet accounted for about a quarter of job gains in 2010, he says, which showed employers needed more workers, but weren't ready to commit to hiring full-time workers. A drop in temporary workers is an indication of growing confidence, O'Keefe says.

Average hourly earnings also showed minimal improvement, increasing by 8 cents to $22.86. But the average work week fell by 0.1 hour to 34.2 hours. "The bounce in wages plugs the hole in the drop from hours worked," Englund says.

Unemployment rates fell to 8.8 percent for adult men, 8 percent for whites, and 11.9 percent for Hispanics. But groups with higher unemployment saw little relief. The rate remains at 15.7 percent for blacks and 25.7 percent for teenagers. About 13.9 million people are out of work, and 44 percent of those unemployed have been jobless for 27 weeks or more.

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The Labor Department also revised job gains for November, upping the figure to 93,000 from 71,000, and for December, increasing to 121,000 from 103,000. In addition, the department incorporated new population estimates into last year's figures, a revision it makes each January, which showed job gains in 2010 were likely weaker than initially reported.