South By North Strategies, Ltd.

CHAPEL HILL (February 3, 2012) – The national employment situation improved in January, as employers added 243,000 more payroll positions than they eliminated. The unemployment rate also fell to 8.3 percent. While the growth in payroll employment and the drop in the unemployment rate are positive, the labor market remains far from healthy.

“The January employment report always is a complex one due to the inclusion of multiple annual data adjustments and methodological updates,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Those changes mean that the January report should be taken with a grain of salt, especially since the data are not strictly comparable to those from prior months.”

In January, the nation’s employers added 243,000 more payroll positions than they cut. Gains occurred exclusively in the private sector (+257,000), while government payrolls fell by 14,000 positions due chiefly to cuts at the local level (-11,000). Additionally, the payroll employment numbers for November and December underwent upward revisions; with the updates, the economy gained 360,000 jobs over those two months rather than the 300,000 positions previously reported.

With the exception of information and financial activities, every major private-sector industry group netted jobs in January. Professional and business services added the most positions (+70,000 due chiefly to gains in the administrative and waste services sub-sector), followed by manufacturing (+50,000 due overwhelmingly to growth in durable goods manufacturing), and leisure and hospitality services (+44,000 due primarily to growth in the accommodation and food services sub-sector). Meanwhile, the information industry shed 13,000 positions, and financial activities eliminated 5,000 jobs.

“Over the past three months, the economy has gained an average of 201,000 jobs,” noted Quinterno. “The current pace of job growth is better than that recorded a year ago, but it is still modest relative to the size of the overall jobs gap. At the current level of growth, it would take until early 2015 before the economy has as many jobs as it did at the end of 2007.”

Soft employment conditions were evident in the January household survey. Last month, 12.8 million Americans (8.3 percent of the labor force) were jobless and seeking work. While the number of unemployed Americans and the unemployment rate fell last month, the share of the population participating in the labor force (63.7 percent) fell, and the share of the adult population with a job (58.5 percent) remained at a depressed level. In fact, diminished levels of labor force participation accounted for much of the drop in unemployment. Had the labor force participation rate remained at its December level of 64 percent, the unemployment rate would have been closer to 8.7 percent.

Last month, unemployment rates among adult male and female workers were the same (7.7 percent for each group). Unemployment rates were higher among Black (13.6 percent) and Hispanic workers (10.5 percent) than among White ones (7.4 percent). The unemployment rate among teenagers was 23.2 percent.

Furthermore, 7.5 percent of all veterans were unemployed in January; the rate among recent veterans (served after September 2001) was 9.1 percent.

“A variety of annual technical updates limits the usefulness of the January employment report, so it is important not to read too much into it,” added Quinterno. “That said, 2012 appears to be off to a better start than 2011, though joblessness and the attendant problems remain widespread.”

Jobs remained difficult to find in January. Last month, the underemployment rate equaled 15.1 percent. Among unemployed workers, 42.9 percent had been jobless for at least six months with the average spell of unemployment lasting for 40 weeks.

“The January employment report offers much proof that the labor market is not rebounding as rapidly as it should following a recession of the magnitude of the recent one,” observed Quinterno. “While conditions have improved in recent months, growth remains too subdued to return the labor market to pre-recessionary conditions anytime soon.”

“Interpretations of the January employment report that suggest that ‘all is well’ and that policymakers can turn their attention to other issues are fundamentally flawed ones that ignore the fact that the economy is not generating enough jobs for millions of Americans who need and want to work.”