January Labor Numbers Nothing but Confusion

Here we go again! After several very positive months the job market seems to have gone in the dumps again with the private sector adding only 36,000 jobs in January.  But, the unemployment rate also dropped sharply.  Have the rails come off again?  No, we just cannot seem to explain the numbers very well or we have some good excuses.  Let’s take a look at these two employment data points and what experts who comb through them are saying.  The number of jobs gained and lost comes from a survey of businesses and is based on the number of payroll jobs on the books.  So the difference between jobs gained and jobs lost was the 36,000.  Economist had expected a much higher number given all the other economic indicators that continue to show improvement  in the economy.  Several reasons: weather – bad weather nearly everywhere probably hindered job creation.  Other factors to consider: productivity continues to climb per worker (meaning there is not an urgent need to hire people); more people are doing contract work or special projects and do not appear on payrolls; and more people are starting their own businesses and do not enter salary until reporting taxes.

Several reports also suggested that big companies were not hiring as many workers as expected.  That appears to contradict activity on many campuses where large companies have been aggressively pulling in new graduates.  This activity however will not show up until late spring and early summer when the new grads actually go on the payroll.  A troubling thought about current hiring levels compared to recruiting activity on campus is that recent grads and those with little experience do not seem to be gaining any traction.  It seems that companies are spending most of the energy on new grads and ignoring the needs of talented recent grads who have not landed in the workplace.  If true this portends some significant problems down the road.

The second data point is the unemployment rate which is obtained from a survey of individuals.  The drop from 9.4% to 9.0% probably suggests a bleaker picture.  Many people have given up looking for work and thus drop out of the unemployed category.  If we look at the length of unemployment trend line, the length of unemployment of 6 months or longer has remained stubbornly high – thus leading to more discouraged workforce. But the biggest drop in unemployment is due to the fact that the government revised the basic population numbers that are used to calculate the workforce.  The God of numbers has spoken.

Bottom line: we are still struggling! And while the new grad market seems to be floating higher than other boats, there are probably not enough jobs to go around so some of the class of 2011 are going to have to work really hard to find a position.