Another worrisome jobs report: Unemployment drops for the wrong reason

The US Bureau of Labor Statistics announced on Friday, January 7th, 2011 the results of the December household and establishment employment survey. The general unemployment rate dropped unexpectedly to 9.4% of the labor force. Non-Farm payroll grew by 103,000 jobs. The biggest gains were in health care and leisure and hospitality.



The lower rate was based on 123,000 workers who have dropped out of the labor force in December. The labor participation rate was 64.3% overall down from 64.7 a year ago. Between December 2009 and December 2010 the working age population increased from 236.9 million people to it was 238.9 million: about a 1.95 million increase. However the number of people participating in the labor market increased only 500K a difference of 1.45 million. In other words 1.5 million people dropped out of the labor market.

The economy grew less than expected adding only 103,000 jobs. Many economists expected around 140K – 150K jobs. In addition, most of the jobs came from the retail section which is heavy influenced by seasonal trend. Private payrolls added 113,000 jobs while government dropped 10K.

Here us a graph of Non-Farm Payroll since the recession.



The economy is still "short" 7 million jobs from the beginning of the recession.




While the the general unemployment rate dropped 0.4%, the Black Unemployment rate was little changed at 15.8%. The rate for Hispanics was 13.0%.



The Non Farm Payroll employment numbers showed an increase of 103,000 jobs. Job gains in private services were slighty offset by a 10,000 job decrease in the government sector and a loss of 2,000 in manufacturing.



Average unemployment duration also increased. The average was 34.2 weeks and increase of 0.3 weeks and the median (half under / half over) increased 0.7 weeks to 22.4 weeks. 6.4 Million people (44% of the total) were out of work for more than 27 weeks. The figure also represents a jump of 113,000 in the long-term unemployed.

There are other revealing statistics: The number of people working part time for economic reasons was approximately 8.9 million. The number of discouraged workers increased from 1.28 million to 1.32 million (about 40,000). Discouraged workers have increase 389,000 since the same period last year. Discouraged workers are people who have not looked in the past 4 weeks because they believe no work is available, could not find work, lack training or employer discrimination. Part-time for economic reasons” workers dropped by 29,000.

Of related interest, ADP, released it’s employment report on Wednesday, Jan 5th, 2011 which showed an increase of 297,000 jobs created between November and December. Economist believe employment must grow by 150,000 jobs to keep up with population growth. However, most models have fixed labor participation rates.

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