NCPA - National Center for Policy Analysis

Behind the New Jobs Numbers

February 7, 2011

On the surface, the January jobs report sows nothing but confusion -- bad top-line jobs but a sharp drop in unemployment.  The Bureau of Labor Statistics (BLS) reported only 36,000 new nonfarm jobs -- 50,000 new jobs in the private sector.  But unemployment was down from 9.4 percent to 9.0 percent.  So what to make of this report? asks Douglas Holtz-Eakin, president of the American Action Forum.

Weather, weather, weather.    

  • The BLS underplayed this in its release, but the performance of weather-sensitive sectors suggests otherwise.
  • Construction lost 32,000 jobs, and transportation payrolls were down by 38,000.
  • Still, the overall data had little strength in hours worked or weather-insensitive categories.

Inside the unemployment rate.    

  • The unemployment rate fell because (a) the labor force continues to decline, and (b) the number of people reporting being employed in the household survey rose by 117,000.
  • Some will argue the household-survey numbers reflect the effects of the tax bill in the lame-duck session of Congress.
  • That makes little sense, because it codified current policy and didn't reflect any real shift; instead, the most likely candidate is the arrival of the conservative House positioned to block the antigrowth excesses of the past two years.

The bottom line: Taken as a whole, the January report is a net negative -- few jobs, few hours and massive labor-force departure.  The glimmer of good news may be arising from a new policy climate more favorable to small business, says Holtz-Eakin.

Source: Douglas Holtz-Eakin, "Curveball or Snowball?" National Review Online, February 4, 2011.

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