Rotten Jobs Report: 4 Questions

Bad weather or not, the Labor Department January jobs report is out and it was a bummer. :Last month, the US economy created a measly 36,000 total new non-farm jobs. That was well-below the 2010 average of 93,000 jobs per month.

For the record, when it comes to January, weathermen are beating economists when it comes to predictions. Analysts were expecting 150,000 new non-farm jobs and an unemployment rate of 9.5 percent -- the "experts" missed badly in December too.

The report noted that 886,000 Americans did not work due to severe weather. That's a big jump compared to the 259,000 who enjoyed a few "snow days" instead of working.

Even if the weather was a contributing factor to this report, there were only 121,000 jobs added in December and 93,000 in November. As a reminder, the US economy needs to create 125,000 a month just to keep pace with new entrants to the work force. It will take a series of consecutive gains of over 200,000 jobs a month to get the nearly 14 million unemployed back to work. That may seem like a big number, but in the early stages of past recoveries, +250,000 months have been common.

Here are four questions from the report:

1. How can the rate drop when so few jobs were created? The number of jobs created comes from a survey of businesses, while the unemployment rate comes from a survey of households. When unemployed people stop looking for jobs, the government no longer counts them as unemployed, which can cause the unemployment rate to drop.
2. Was there any good news? There were an additional 40,000 jobs added in November and December, according to revisions. Also, manufacturing added 49,000 jobs, the largest amount since August, 1998. That's about it, though...
3. Why is hiring so slow? Employers add workers when the demand for their goods and services increases. This recovery has been vexing because while we have seen improvement (the US economy grew by 2.9 percent last year), it has been uneven. I can't think of three consecutive months where economic data and global events have pointed up. As a former business owner, I can tell you that the fits and starts of this recovery is nerve-wracking, especially after living through such a deep and painful recession. To make broad hiring decisions, we're going to need not just economic improvement, but consistent growth.
4. Why is job creation lagging past cycles? According to the New York Times "After the 1990-91 recession, it took 23 months to add back the jobs lost. After the 2001 recession, it took 38 months. (And it's worth keeping in mind that one of the great housing and credit bubbles in American history fed that hiring; no economist expects that to repeat itself). At the current rate, the economy will need 72 to 90 months to recapture the jobs lost during the Great Recession. And that does not account for the five million jobs needed to keep pace with a growing population." Unfortunately, duration compounds the problem. Because job growth has been so slow, employers have had the luxury of adding lower wage jobs than in the past. This is worrisome, especially when middle class wages have stood still for a at least a decade. About 4 million people have left the labor force since the start of the Great Recession.

• January: +36,000
• December: +121,000 (revised up from +103,000)
• November: +93,000 (revised up from +71,000)
• Unemployment Rate: 9.0 percent, from 9.4 percent in December
• Under-Employment Rate (marginally attached, part-time): 16.1 percent, down from 16.7 percent (high was 17.4 percent in October 2009)
• Unemployed persons: 13.9 million, from 14.5 million
• Long-term unemployed (jobless for 27 weeks and over): 6.2 million, down from 6.4 million in December (peak was 6.8 million in May 2010)
• Part-timers (or had hours cut for economic reasons): 8.5 million, from 8.9 million
• Average Hourly Earnings: +8 cents to $22.83
• Average Workweek: 34.2hrs
• Temporary help services: -11K
• Health care: +11K (below average of 22K/mo)
• Retail: +28K (123K added since December, 2009)
• Government: -14K, third consecutive month of job losses, due mostly to state and local cuts
• Construction: -32K
• Manufacturing: +49K (largest since August, 1998)

Jill Schlesinger

Jill Schlesinger, CFP® is the Emmy-nominated business analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and chief investment officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.

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