January Jobs Report: Even the Cooked Numbers Are Bad

The January jobs report is another sign of how weak our economic recovery is - and it's not even taking into account all of the unemployed.

Friday, the Labor Department reported employers added 113,000 jobs last month. The unemployment rate ticked down to 6.6% from 6.7% in January, a rate not seen in five years.

But we know that number doesn't tell the full story...

The decline in the unemployment rate is due to an ongoing trend: discouraged workers exiting the labor force.

The actual unemployment rate, the U-6 rate, which includes "marginally attached workers plus total employed part time for economic reasons," remains at an unhealthy 12.7%.

And ShadowStats.com brings us an even more real look at the distorted U.S. jobs report.

As Money Morning Chief Investment Strategist Keith Fitz-Gerald pointed out last month, ShadowStats calculates the U.S. unemployment rate including the long-term discouraged workers. They stopped being counted in government numbers in 1994.

Their measure puts the U.S. unemployment rate at around 24%.

"The main message in this report is that the economy is not growing fast enough to create jobs. And, it reinforces the picture painted by the pretty mediocre GDP report released last week," Steven Pressman, Professor of Economics & Finance at Monmouth University in Long Branch, NJ, told Money Morning. "Unemployment fell over the past year, but mainly because the labor force fell by more than 200,000 workers from January 2013 to January 2014, instead of growing by around 1 million workers. This cannot and will not continue."

As of January, 7.8 million jobs have been recouped from the 8.7 million lost in the financial crisis - so we're still one million jobs short. And when accounting for population growth, economists say it will still take years to get back to a pre-recession jobs market.

Here are other notable changes in this month's dismal jobs report.

Details from the January Jobs Report

  • While higher than the jobs numbers reported in December, the January jobs report figure of 113,000 was well below economists' expectations of 178,000 to 189,000.
  • The healthcare sector, which maintained a solid showing throughout the Great Recession, trimmed headcount by 400, marking the first month of job losses in 11 years.
  • Federal, state, and local governments slashed 29,000 positions.
  • Retail lost 12,900 jobs.
  • Temporary business hiring, an indication of future hiring, added a weak 8,100 jobs.
  • The average hourly work week, a leading indicator, was unchanged at 34.4.
  • Average hourly earnings, another leading indicator, rose a scant 5 cents from December to $24.21, a tab ahead of inflation.
  • Some 3.6 million Americans have been employment six months or longer. Those relying on extended government benefits lost them in December.
  • More than half of January's jobs gains came from construction, manufacturing, and mining, which added 48,000 jobs, 21,000 jobs, and 7,200 jobs, respectively.
  • Professional and business services added 36,000. However, a good portion of those jobs came through staffing agencies
  • The hospitality sector, which includes hotels, restaurants and bars, increased headcount by 24,000.

So what next?

The March 18-19 Federal Open Market Committee (FOMC) meeting will be the first for new Fed leader Janet Yellen - and the employment situation will be reviewed when making a taper decision.

While many expect the Fed to continue tapering QE in $10 billion increments, the central bank specifically stated that there is no preset timetable for ending the program. The Fed stated that tapering will "remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases."

Money Morning's Fitz-Gerald said after the last FOMC meeting that recent economic data does not justify a taper, which could mean a change in 2014 as Yellen plays the hand she was dealt.

"I continue to believe that the numbers do not justify a taper and that we will see Yellen re-engage the printing presses, even if she calls the 'innovative' market actions she's supported something other than stimulus later this year," Fitz-Gerald said.

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