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RISMEDIA, February 8, 2011—(MCT)—America’s economy continued to improve in January 2010, the latest government jobs report confirmed, even though the details were somewhat contradictory and confusing.

The unemployment rate went down to 9.0%, a sharp drop of 0.4 percentage point. But the number of payroll jobs expanded by only a paltry 36,000, which in itself isn’t nearly enough to reduce the jobless rate.

The reason behind the apparent conflict in those two headline numbers stems from the fact that each number is derived from a different survey, and they don’t capture the same data.

That conflict aside, analysts said the numbers confirmed the trend that’s been apparent for more than a year: The economy is expanding slowly, the recovery is gaining traction and jobs are gradually coming back. Friday’s weak jobs number was an outlier, perhaps distorted by severe winter weather and statistical revisions.

“All the evidence coming in on the economy is coming in above expectations. That includes chain store retail sales for January, much better than expected. Car sales, up slightly in January despite the bad weather,” said Nigel Gault, the chief U.S. economist for forecaster IHS Global Insight.

Other positive indicators, he said, include surveys of manufacturing and the services sector that were more positive than expected and had strong employment components.

“A weak payroll survey is one piece of information, but most others, including other data about the labor market, are substantially better,” Gault said.

Some analysts viewed the Bureau of Labor Statistics data skeptically.

“The job market is tough, but it isn’t as tough as the weak job gain during the month suggests. The sharp decline in unemployment is also misleading. The number of people in the labor force plunged. The true underlying rate of unemployment won’t become evident until labor force growth resumes expanding again,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “Bottom line is that it’s very difficult to learn anything about what is going on in the job market and broader economy from this report.”

The Obama administration highlighted the bright side.

“Revisions to private-sector payroll data show that 1.1 million jobs were added during 2010, the strongest private-sector job growth since 2006. The 0.8 percentage point decline in the unemployment rate over the past two months is a welcome development; however, the rate remains unacceptably high,” Austan Goolsbee, the head of the White House Council of Economic Advisers, said in a statement. “The overall trend of economic data in recent months has been encouraging…but there is still considerable work to do.”

The monthly BLS jobs report is the product of two surveys, one that measures payrolls from businesses and governments, and the other of households. The payroll survey showed the tepid hiring—36,000 new jobs on net in January.

Sophisticated analysts stress that they don’t fixate on any single month’s job numbers, but rather put them in the context of the past several months, not least because the BLS revises previous months’ numbers as more data come in. Friday’s January report was no exception.

The BLS revised numbers from the previous two months upward by 40,000 jobs. Private-sector job growth in November was raised to 93,000, and December’s to 121,000.

The initial January private-sector job-growth number was 50,000, but when government’s loss of 14,000 jobs is included, the economy’s net gain was only 36,000. The past three months averaged 83,000 jobs added monthly, about half of what’s needed to keep pace with new entries into the work force.

While the revisions weren’t huge, they did confirm the trend of increased, albeit soft, hiring.

The household survey told a different story, and that’s the one that yields the unemployment rate.

More than 600,000 people in that survey said they didn’t have jobs the previous month but did have them in January. The household survey supported economists who think that the payroll survey doesn’t adequately measure small business hiring and the household survey may do that better, and also includes the self-employed.

The breakdown of payroll hiring numbers told a mixed story. Manufacturing employment surged by 49,000 in January, and retailers added almost 28,000 new positions. The broad category of professional and business services was up 31,000 for the month. Those numbers are in line with growing indices of manufacturing output and strong consumer spending recorded in the final months of last year.

These gains, however, were offset by steep drops in construction employment, down 32,000, and in transportation and warehousing, which fell by 38,000.

Analysts blamed much of this on the severe weather, particularly in the densely populated Northeast.

“The January unemployment report does not seem very useful for judging underlying labor-market trends and it appears to have been massively distorted by the weather,” New York forecaster RDQ Economics said in a note to investors.

Surprisingly, temporary help, usually a harbinger of future hiring, fell by 11,400 jobs in January. The BLS report highlighted this drop by noting that “temporary help had added an average of 25,000 jobs per month over the prior 12 months.”

One positive sign came in the average hourly earnings in January, which increased by 8 cents, or four-tenths of a percent. Over the past 12 months, the BLS said, average hourly earnings have increased by 1.9%.

“I’m increasingly confident that we are on the cusp of much better job numbers. Businesses are very profitable, their balance sheets are healthy and sentiment is improving,” said Zandi, the forecaster.

(c) 2011, McClatchy-Tribune Information Services.

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