Last Friday’s jobs report indicated that virtually no jobs were added (a paltry 36,000 to be precise), yet the unemployment rate dropped from 9.4% to 9.0%
How can that be?
Well first, January is the month when major revisions are made to the factors used to project ‘sample numbers’ to the ‘population numbers’. In other words, the metrics go from apples-to-apples to apples-to-who knows what.
- For a recap of January revisions, see “The Super Bowl of jobs reports”
Most often, when the unemployment rate dips without a surge in jobs, it’s attributed to a LOT of unemployed folks getting discouraged and suspending their efforts to find jobs. When they throw in the towel, they’re no longer counted as unemployed.
- One reason the unemployment rate fell is that the civilian labor force declined by half a million last month as discouraged workers left the labor force. With fewer workers in the labor force, the unemployment rate is lower. The labor force participation rate continued its downward trend, from 64.3 percent in December to 64.2 percent in January, and is now at the lowest level since March 1984.
Washington Examiner: http://washingtonexaminer.com/opinion/columnists/2011/02/behind-numbers-people-leaving-workforce-means-unemployment-down#ixzz1DC3Ecb8v
This January’s unemployment report had an extra twist: the snow storms that hit much of the country.
According to some analysts, a million or more people reported that they stopped looking for work in January because the weather was too bad. So, they were no longer counted as unemployed.
So, if the weather warms – or at least the snowfalls stop – these folks are likely to re-start their job searches, will be counted again as unemployeds, and the unemployment rate will go back up.
That is, unless it gets too hot to look for work.
This is a great country …
The Homa Files 
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