South By North Strategies, Ltd.

CHAPEL HILL (February 4, 2011) – A complex national employment report for January offered few clear insights into the state of the American job market. Last month, employers added just 36,000 more payroll positions than they eliminated, but at the same time, employment rose and the unemployment rate fell to nine percent.

“The January employment report was a messy one due to the inclusion of multiple annual data adjustments and the introduction of certain methodological changes,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “While the effects of those changes will be debated, the bottom line is that the labor market still is not on a speedy path to recovery.”

In January, the nation’s employers added 36,000 more payroll positions than they cut. Gains occurred exclusively in the private sector (+50,000), while government payrolls fell by 14,000 positions due chiefly to cuts at the local level. In recent months, the government sector – the local government sub-sector in particular – has weighed on job growth. Additionally, the payroll employment numbers for November and December were revised upwards. With the revisions, the economy netted 214,000 jobs over those two months rather than the 174,000 positions previously reported.

Private-sector gains in January occurred primarily in manufacturing (+49,000) and professional and business services (+31,000). Private-sector losses occurred in construction (-32,000) with all other private-industry groups experiencing few or no changes.

“The January employment report offered little evidence that a recovery is taking hold in the labor market,” noted Quinterno. “The current pace of growth, while positive, will not produce the jobs needed to accommodate all those Americans who need work.”

In contrast to the payroll report, the household survey for January was more positive. Last month, 13.9 million Americans (9 percent of the labor force) were jobless and seeking work. While the number of unemployed Americans and the unemployed rate fell last month, the size of the labor market fell as well. All of the changes are tied to statistical adjustments and therefore data for December and January are not strictly comparable. On a related note, the share of the population participating in the labor force (64.2 percent) remained at a level last seen in the early 1980s.

Last month, proportionally more adult male workers were unemployed than female ones (8.8 percent vs. 7.9 percent). Similarly, unemployment rates were higher among Black (15.7 percent) and Hispanic workers (11.9 percent) than among White ones (8 percent). The unemployment rate among teenagers was 25.7 percent. With the exception of teenagers, unemployment rates for every major demographic group were lower in January than in December, though methodological changes limit the usefulness of comparisons.

Furthermore, 9.9 percent of all veterans were unemployed in January. The unemployment rate among recent veterans (served after September 2001) was 15.2 percent.

“Despite the sharp drop in the unemployment rate, jobs remained difficult to find in January,” added Quinterno. “Last month, the underemployment rate equaled 16.1 percent. Among unemployed workers, 43.8 percent had been jobless for at least six months with the average spell of unemployment lasting for 36.9 weeks.”

“The messy January employment report offers little guidance as to the state of the American job market,” observed Quinterno. “The sharp drop in the unemployment rate seemingly is inconsistent with the recorded level of payroll job growth. Yet the confusion should not obscure the fact that the labor market remains in ill-health by most any objective measure.”