Unemployment Numbers

Via the BLS:

Top story here is a lower unemployment rate, down to 9.7% in January from a December level of 10%. Non-farm payrolls declined by 20,000, a somewhat negligible decline. All in all, jobs were relatively flat in January excluding a few positive signs in the report.

"Employment in manufacturing was little changed in January (11,000). After
experiencing steep job losses earlier in the recession, employment declines
moderated considerably in the second half of 2009.

Retail trade employment rose by 42,000 in January, after showing little
change in the prior 2 months. Job gains occurred in January among food stores
(14,000), clothing stores (13,000), and general merchandise retailers (10,000)."

I've posted several times recently about the broad uptick in most manufacturing indexes and whether or not it represents only an inventory bounce, or significant demand side economic growth. Industrial production, ISM PMI, and capacity utilization have all been improving at an accelerated pace in recent months. Until now, none of it had translated into any good news on the jobs front, (in December manufacturing still lost 27,000 jobs), but finally, for the month of January we have a positive jobs number in the manufacturing sector to the tune of 11,000 new jobs. This still isn't exactly the pace of growth we'd like to see, but it's certainly better than nothing. Continuing increases in labor productivity and average hours worked per week have given manufacturers further incentive to stand pat rather than hire more workers. From a business perspective, if your employees are working hard, producing well, and on average not working overtime, there's no reason to seek out and hire new workers. Your margins are increasing because labor productivity growth is far outpacing wage growth, which leads to higher profits. Couple the prospects of lower labor costs with uncertainty in the economy and you have a perfect environment for slow job growth in manufacturing.

The retail story is very similar but we're actually starting to see significant job creation here. Firms have seen increases in consumer sentiment and PCE translate to higher sales, and are hiring accordingly. We seem to be recovering, slightly, in at least one or two sectors. This is some good news, but below is something to temper your enthusiasm a little.

"Construction employment declined by 75,000 in January, with nonresidential
specialty trade contractors (-48,000) accounting for the majority of the de-
cline. Since December 2007, employment in construction has fallen by 1.9
million."

So this isn't really surprising given commercial real estate markets recently, check out this post from a few weeks ago for further analysis of the commercial mortgage backed security (CMBS) market. Anyway, it appears construction in residential and non-residential will be lagging the recovery, which will result in more numbers like the one above. Sad but true.