April Job Market

The headline numbers of this morning's job report were very strong: unemployment falling to 6.3% and 288,000 new jobs added.  Earlier this week, economic growth was reported to be near zero in the first quarter, but now the job growth was the highest since January 2012 ... is the economy at a standstill or accelerating?

First, let's dissect the job market report.  Let's start with the good news.  The job gains were quite strong and across the board.  In fact, next month the economy will finishing recouping the job losses suffered during the Great Recession (currently 113,000 below the pre-recession peak).  Construction employment reached 6 million, a gain of 32,000 for the month, 189,000 over the last 12 months and the highest level since June 2009.  Professional and Business services added 75,000 jobs in April and 676,000 in the last year.  Food and Drinking places continues to be strong, adding nearly 33,000 in the month and 1.3 million since hitting bottom in Feb 2010 (an increase of 14%).  Currently, 1 out of every 11 employees in the private sector works in a restaurant or bar.  Further evidence of strenght is shown by the increase in aggregate hours worked which, after declining slightly between November-February, is up sharply the last two months.  This provides support for the temporary effects of the harsh winter followed by a Spring thaw.

OK, are there any reasons for caution?  Why did the unemployment rate fall so much?  Over 800,000 people dropped out of the labor force, reducing the participation rate back to its recent low of 62.8%.  If the participation rate had remained constant, the unemployment rate would have remained at 6.7% (so the entire decline was due to fewer people looking for jobs).  It should be noted that the labor force was reported to increase by over 500,000 in March.  Given this volatility, it confirms the need to look at trends over time as opposed to monthly changes.  One more conern is that hourly earnings were flat in April as were weekly earnings, so the recent economic improvement has had little effect on wages thus far.

Going back to the question at the beginning of the post - is the economy at a standstill as indicated by first quarter GDP report or accelerating as indicated by the job market report?  This morning's report provides support for the idea that the harsh winter resulted in a temporary slowdown, supressing first quarter GDP.  Part of the job gains in recent months is due to a bounceback as the weather has improved, but the underlying trend has improved somewhat in 2014.  This doesn't necessarily mean the economy is ready for takeoff, but it does put to rest the idea that the economy is slowing down.

March Job Market Report: Florida and Orlando

The latest report regarding the status of the labor market for Florida and its metro areas was released this morning and it confirmed the recent strengthening taking place in the local job market.  Though the unemployment rate for Florida rose slightly, it was due to an increase in the number of people looking for jobs rather than fewer jobs available.  After declining since the start of the recession and falling to slightly less than 60% a few months ago, the participation rate is now 60.5%.  Payrolls rose by nearly 23,000 in March, with private payrolls up 3.5% over the last 12 months (one of the highest rates in the nation).  Leading sectors included accommodation and food services (up 6200 for the month) and construction/real estate. Construction has now added over 40,000 jobs (+11.5%) since last March and is up nearly 20% since reaching a low in the summer of 2011 while real estate, rental and leasing finance has added 7700 jobs over the last 12 months (+4.7%).  The good news in construction and related sectors should be tempered by recognizing that construction employment is back up to where it was in July 2009, at the end of the recession.

Central Florida added 3000 jobs in March (not seasonally adjusted), 2600 of which were in leisure/hospitality.  As with the state, construction had the largest employment growth rate over the last year, up 8.6%.  Other areas of growth included leisure/hospitality (up 9500 or 4.3%), retail trade (up 5600 or 4.3%) and professional/business services (up 5500 or 3.2%).

 After modest job growth in recent years that struggled to keep up with population growth, both the local and state job markets have strengthened recently, achieving both stronger and broader employment gains which have begun to attract those on the sidelines to re-enter the job market.

March Employment Report

The government released its latest snapshot of the job market this morning.  The headline figures showed no change in the unemployment rate (remained at 6.7%) while the economy added 192,000 jobs.  However, once one digs into the details, the report was stronger than the headlines indicate (based on recent standards).

The employment-population ratio rose to 58.9%, the highest rate since August 2009.  The year-over-year increase (0.4%) was the largest since January 2007.  In addition, the labor force participation rose to 63.2%, the highest since September 2013.  The year-over-year decline (-0.1%) was tied for the smallest since October 2008 (the last time it increased over a 12-month period).  OK, this isn't great news, but it suggests that the participation rate may be stabilizing and employment growth is finally outpacing population growth (both are indications of a strengthening job market).

Private employment is at its highest level ever (finally exceeding its pre-recession level), though total employment is still 437,000 below its January 2008 high (due to a decline in government employment).  In addition to the gains in employment, hours worked also increased.  Total hours worked for all employees (not the average work week) is now slightly higher than right before the recession (up 0.1% since November 2007, though slightly lower than early 2008).  New highs for total hours worked were achieved in education/health (up 10% from Nov 2007), professional/business services (up 8.5%) and leisure/hospitality (up 8%).  Lagging industries include construction, which is down 20% since the start of the recession, but reaching the highest level since March 2009, and manufacturing, which is down 10% from the start of the recession but at its highest level since December 2008.

What are the key takeaways?  The labor market is showing signs of real improvement, though still not as much as most would like.  The job market has recovered most of the ground lost during the recession, but population has increased quite a bit since then, so it is still far from being a strong job market.

Some Thoughts on the Employment Report for Florida and Metro Orlando

The latest information about the job market in Florida and Orlando was released on Friday.  The headline numbers looked good: Florida added nearly 33,000 jobs in March and the unemployment rate fell to 7.5% while the unemployment rate in Orlando declined to 6.6% with employment rising by 3500 (metro data are not seasonally adjusted).  Of course it's important to look at the details.

The entire decline in the unemployment rate for Florida was due to a decline in the labor force participation rate, which fell from 60.5% to 60.3%.  If the participation had remained constant, the unemployment rate would be 7.8%.  In terms of nonfarm payrolls (employment), nearly a third of the jobs were in accommodations and food services.  However, a sizeable portion was also in construction, which was the fastest growing sector of the economy.  Add it up and it was a pretty good report for Florida.

The decline in Orlando's unemployment rate was due in part to a somewhat strong job market, but a significant portion resulted from seasonal factors and a decline in the labor force participation rate.  What really stood out was that over 90% of the job growth in March was due to leisure and hospitality (3200 out of 3500); that sector also accounted for over 60% of employment growth over the last 12 months.  The high concentration of job growth in one sector and the fact that leisure/hospitality jobs have lower pay than most other sectors raises questions about the strength of the Orlando economy.  So there's a mixed picture for metro Orlando: a sizeable decline in the unemployment rate, but employment growth concentrated in one of the lowest paying sectors.  One other item to note is that construction employment declined in March as well as over the last 12 months, which does not seem to fit with the anecdotal evidence of increasing construction activity.

What are the key takeaways?  Job growth in Florida is outpacing that of the nation over the last year, though Orlando is coming up short (1.9% growth for Florida, 1.4% for the US, and 1.3% for Orlando).  Given cutbacks in government employment, private sector employment growth is stronger (2.4% for Florida, 1.6% for Orlando).  Florida's labor market continues to improve, but similar to the nation, a declining participation rate is contributing to the declining unemployment rate.  Orlando's job market also is improving, but there are concerns about the quality of jobs as well as growth being concentrated in one sector rather than broad-based gains.

October Job Report

The October job report presented some good news mixed with some not so good news.  At first glance, I thought the report was quite positive, better than the report for September.  But didn't the unemployment rate rise in October (now at 7.9%) while it declined in September (from 8.1 to 7.8%)?    As discussed in last month's post concerning the job market, last month's decline wasn't supported by the other data within the report or elsewhere.  This month's report had several positive points.  The private sector added 184,000 jobs in October after adding an upwardly revised 128,000 in September.  Job creation was spread across many sectors, which is a good sign.  Of course calling job gains of 184,000 good shows how low expectations have been set.  More good news can be seen in the household survey which reported an increase in the labor force participation rate as well as more job creation.  The employment-population ratio rose to 58.8%, the highest since August 2009, still down from over 63% prior to the recession.  So the headlines from both surveys used to estimate the state of the job market were positive.

What's the not so good news?  The index of aggregate hours worked (see table B9 - production and nonsupervisory workers) declined slightly (another measure of aggregate hours worked increased slightly).  Looking at more details by industry (table B2), it looks like there were small declines in weekly hours worked for various industries.  Though the establishment survey (used to estimated nonfarm payrolls and hours worked) doesn't distinguish between part-time and full-time employment, the increase in employment accompanied by a small decrease in average weekly hours suggests many of the new hires are part-time workers.  The household survey does distinguish between part-time and full-time employment and indicates that about one-third of the jobs created based on its survey were part time (table A9).  In addition, average hourly earnings declined slightly and is now up 1.6% over the last 12 months, which means real hourly earnings (i.e., after adjusting for inflation) are flat (since consumer inflation is running at about 1.7% (according to the PCE index).

What's the takeaway?  It was a pretty good report overall, showing more job growth spread across many industries and more people returning to the job market.  However, the weakness in hours worked and hourly earnings are reasons for caution.  In addition, emloyment gains seem to be outpacing other indicators of the economy including GDP (which rose by 1.3% and 2% in the last 2 quarters, respectively) and business investment (which is been sluggish of late).

August Job Report

The government released the employment report for August this morning and there was little to cheer about.  The headline numbers are the unemployment rate declining to 8.1% and nonfarm payrolls up 96,000 (significantly below the consensus) along with downward revisions to previous months of 41,000 fewer jobs.  The details are not good.

Why did the unemployment rate fall?  Many more people dropped out of the labor force (gave up looking for work) and thus are no longer counted as unemployed (387,000 men left the labor force).  In fact, the labor force participation rate declined to 63.5%, the lowest since September 1981 (which involved a one-month downward blip); the last time it remained around this rate was 1978.  Here's a chart going back to 1970:




In addition, the employment-population ratio fell to 58.3%, just 0.1% above its recent low (reached a few times in 2009-2011; see chart below):



The type of jobs being created is also meaningful.  Nearly 30% of net job creation took place in food and drinking establishments (up 28,000), not exactly the highest paying jobs.  Average hourly earnings declined slightly in August while average weekly earnings are up 38 cents in the last year (rose from $655.20 to $655.58).

By now you may be thinking that there has to be some good news in the report.  Let's give it a try.  Aggregate hours worked increased slightly.  Also, computer systems design & related services added over 10,000 jobs (probably good paying jobs).

What's the primary takeaway?  You guessed it; the economy is still moving forward, but remains sluggish.  Much of the improvement in the unemployment rate comes from fewer people participating in the job market.  How much?  The unemployment rate peaked at 10% in October 2009 with a labor force participation rate of 65%.  If the labor force participation rate had remained the same, the unemployment rate would have risen to 10.2% instead of declining to 8.1%.

July Job Report for Florida

The Florida job market worsened in July as the state lost 3300 jobs and the unemployment rate rose to 8.8%.  Job losses were spread across various industries, led by wholesale trade and local government, both down 3100 for the month (seasonally adjusted).   Industries that added jobs included employment agencies (temps) and amusement parks.  In fact, employment agencies have experienced an increase of 27,200 jobs over the last year (an 18% increase), which represents nearly 40% of the net increase in overall jobs statewide.  Number two in terms of adding jobs over the last year was food and accomodation places, with an increase of 11,500 while the industry shedding the most jobs was state government, down 6300 since July 2011.  Overall, the private sector has added 7800 jobs thus far in 2012, while the public sector lost 9600, resulting in a net loss of 1800 jobs so far this year.  Meanwhile, the labor force declined slightly, reducing the labor force participation rate to 60%.  The decline in the participation rate is responsible for about a third of the decline in the unemployment rate this year.

The unemployment rate for metro Orlando rose to 9.1% from 8.7% in June.  About half of the increase was due to seasonal factors.  The government releases its estimate of the seasonally adjusted unemployment rate for metropolitan areas several weeks after the main job report.  It's likely that the seasonally-adjusted rate rose from 8.5% to 8.7%.  Orlando lost 5500 jobs in July and now reports a one percent increase over the past year, the same as Florida with both lagging the country, which posted an increase of 1.4%. 

What's the takeaway from this report?  Both the state and local economy continue to struggle to recover from the Great Recession, with job markets that continues to be quite weak.

June Job Market Report: Florida & Orlando

The latest look at the state and local job market presents more of the same: sluggish job growth.  Florida's unemployment rate was unchanged at 8.6% while Orlando's unemployment rate (not seasonally adjusted) rose to 8.7% from 8.3%.  Though unemployment statewide is declining, the weak labor force participation has exaggerated the decline.  Though Florida's noninstitutional adult population grew by 216,000 in the last year, the labor force grew by only 33,000, reducing the participation rate to 60.1%.  If the participation rate had remained stable over the last year, the unemployment rate would be 9.5% (down from 10.7%, but significantly higher than the official rate of 8.6%).  Florida added 9000 jobs in June (seasonally adjusted) and nearly 71,000 over the last year, which represents an increase of 1% (a slighter faster rate than experienced in recent months).  Industries showing the largest gains include wholesale & retail trade (6600), professional & business services (5600), and leisure & hospitality (4200).  The losers were led by construction (5300), manufacturing (3000) and private education services (2800).

Does the increase in the unemployment rate in Orlando indicate a worsening of the local job market?  Though national and state data are seasonally adjusted, local data is not.  However, the BLS (Bureau of Labor Statistics) releases estimates of seasonally adjusted (SA) unemployment rates for metropolitan areas with a one month delay.  Orlando's seasonally adjusted unemployment rate in May 2012 was 8.6% (as opposed to 8.3% not seasonally adjusted).  Based on seasonal adjustments in previous years, the June rate is probably about 8.6% (SA), indicating little, if any, change in the unemployment rate.  Over the last year, employment in Orlando increased by 1%, matching that of the state.

What's the primary takeaway from the report?  Employment growth in Florida remains sluggish and weaker than the nation, but the year-over-year rate of growth has increased a little (a little good news)!

June Employment Report

The June employment report provides another set of data confirming that the economy is growing at a sluggish pace.  The US economy added 80,000 jobs in June and the unemployment rate remained at 8.2%.  The broad measure of unemployment (U6) rose slightly to 14.9%, above the recent low of 14.5% in March-April 2012. Depending on your perspective, you can view this as significantly below its high of 17.2% in October 2009 but above the low of 7.9% prior to the recession.
About half of the jobs created were in 2 industries: temp agencies added 25,000 jobs while food services and drinking added 15,000.  Local government added 4,000 jobs, but that masks some interesting dynamics.  Local education shed 14,000 jobs (seasonally adjusted) while local government added 18,000 jobs in other areas.  That builds on the trend from May during which local government eliminated 10,000 education jobs but added 5000 outside of education.

Though there are some problems with seasonal adjustments previously noted, employment growth declined significantly in the second quarter.  The chart below shows the growth in jobs by sector in the first and second quarters of 2012, along with the change in the growth (numbers are in thousands):

Industry	2012Q1	2012Q2	Change
Total	+677	+225	-452
Private	+678	+274	-404
Leisure/Hospitality	+127	+2	-125
Education	+63	-56	-119
Private Education	+40	-5	-45
State & Local Education	+23	-51	-74
Manufacturing	+124	+30	-94
Professional/Business Services	+186	+106	-80
Construction	+3	-40	-43
Health Care	+104	+65	-39
Wholesale/Retail Trade	+21	+54	+33
Local Govt (non-education)	-3	+29	+32

Most of the decline in employment growth took place in the private sector (decline of 404,000 compared to 48,000 in government).  Leading the slowdown were declines in job creation in leisure & hospitality and education (including both private & public education), each accounting for about 30% of the decline in employment growth.  While employment in leisure & hospitality went from robust to flat, education went from adding 63,000 jobs to losing 56,000.  Other sectors including manufacturing, professional/business services, and health care continued to add jobs, but at much slower rates while construction went from little growth to shedding jobs.  Two sectors that experienced more rapid job creation were wholesale/retail trade and, to the surprise of many, local government (aside from local education).  What does this imply?  The slowdown in job creation was broad based, reflecting a slowdown in the overall economy.

The Economic Performance of Florida & Its Metro Areas

Recently, I published a study based on research presented at the Florida Economic Symposium in April.  I should note that this doesn't involve sophisticated econometrics, but presents an analysis of the performance of the economies of the major metropolitan areas (MSAs) in Florida over the last decade (click here for the complete study).  Here's the abstract:

"From the highs of the housing bubble to the lows of the Great Recession, the Florida economy experienced significant change during the first decade of the twenty first century.  This study explores the performance of the state and its major MSAs both in terms of economic growth and employment.  In order to explore the relative competitiveness of each area, dynamic shift-share analysis was used to isolate the effects of national growth, industrial composition, and regional competitiveness in explaining the performance of each area’s employment growth.  While the industrial structure had a small positive impact on job growth for Florida and its metropolitan areas, regional competitiveness differed noticeably.  Once one removes the effects of industrial structure and national growth, most areas exhibited positive competitive effects, led by Orlando and Jacksonville.  Only Tampa had a negative competitive position.  Though a detailed analysis is beyond the scope of this study, the primary factor found to help explain the relative competitiveness of each area was its skills ratio: the ratio of adults with college degrees to those without a high school diploma, which showed a correlation of 0.61 with competitiveness.  This suggests at least a two-fold strategy for promoting job creation: strengthening efforts to increase high school graduation rates while also increasing the number of college graduates."

Besides the conclusions stated in the abstract, there's interesting information regarding the change in the composition of jobs in each metropolitan area, Florida, and the US.  It's no surprise that the sectors losing the most jobs tended to be manufacturing, construction, and information services, while the big winner was education and health services (employment in "leisure and hospitality" and "professional and business services" experienced rapid growth in certain MSAs).

When it comes to explaining the relative economic performance of the MSAs, several factors were considered, but the one that had the most impact was education, both at the top end (those completing college) and the bottom (those lacking a high school diploma).  Efforts to address educational outcomes at both levels is the key to addressing employment over time.  Of course this is no surprise since if adults have more human capital (based in part on their education), they'll be more employable.  Locations with more adults who are employable will also experience more rapd job creation.  How do we increase high school and college graduation rates?  That's easier said than done.  It involves more than just increasing spending on education.  It's also impacted by the home life of students, how education is delivered, and other factors as well.  Whether one considers a city, state, or nation, in order to generate more jobs, including high quality jobs, it first needs to create a high quality workforce.

May Employment Report: Florida and Orlando

The latest figures for the Florida and Orlando job market show that the there's still a modest recovery taking place.  The state added 5300 jobs for the month and 53,800 over the last year.  Orlando's numbers, which are not seasonally adjusted, show a loss of 400 jobs in May but a gain of 4400 in the last 12 months.  This indicates a 0.7% rate of growth in employment for Florida and 0.4% for Orlando, both lagging the nation, which had a growth rate of 1.2%.  Despite that, the state and local unemployment rates have declined much more quickly than that of the nation.  How did that happen?  Though many have heard about the declining labor force participation rate nationally, it has fallen even more locally.  In 2007, prior to the recession, the labor force participation rate in Florida was about 64%.  As of May 2012, it has fallen to 60.1%.  This compares to a decline from 66% to 63.8% nationally.  Thus, Florida is experiencing a modest recovery in terms of employment, but the unemployment rate has declined by 2 full percentage points in the last year due in part to fewer people being in the job market.

Which industries are doing well?  Construction and manufacturing both reported significant gains in employment statewide in May, along with wholesale trade and leisure/hospitality.  As expected, state government showed the largest loss in jobs, but private education also had a significant loss (remember, the data are seasonally adjusted).  What about Central Florida?  The big winner locally was construction, which added 1600 jobs (nearly a 4% gain for the month).  As a result, for the first time since 2006, construction has not lost jobs over the previous 12 months.

What's the main message of this report?  Some of the same trends nationally are being seen locally.  Jobs are being added, but at a very modest pace (more slowly than the rest of the country).  The decline in the unemployment rate locally is being impacted by a significant decline in the labor force participation rate, which is falling more quickly than elsewhere.  It's still a recovery, but a modest one at best.

May Employment Report - yikes!

There's no way to spin it any other way.  The May employment report was very weak.  In addition to the weak job growth in May, April's numbers were revised down significantly.  Looking at the numbers, the weakness was evident in several sectors, but two stand out.  Professional and business services added between 70,000-90,000 jobs per month in late 2011 and early 2012, but was flat in May.  Leisure/Hospitality, which had been adding 30,000-45,000 jobs, lost jobs last month.  Together, they represent between a 100,000 and 135,000 decline in the amount of job growth.

Digging further, the index of aggregate hours worked declined and is down at a 1.24% annualized rate over the last 3 months, suggesting that economic growth will be very weak at best in the second quarter.  The household survery shows both an increase in the unemployment rate to 8.2% and an increase in the U6 broad measure of unemployment to 14.8%.  Perhaps more importantly, estimates of full-time employment declined by over 1 million workers in the last 2 months while those working part-time rose (including a 400,000 increase in those working part-time for economic reasons over the last 2 months).  Add it up and it shows a weakening economy.  As discussed previously, the data from earlier in the year were distorted somewhat by seasonal adjustments and weather, but the size of the decline in job growth indicates that it's not just payback from overestimates in December-February, but a weakening economy.

Looking forward, the economy faces considerable pressure in the coming months.  Financial markets are reflecting the most stress since the end of the recession in the summer of 2009 (see previous post).  Does this mean that the US is heading into another recession?  At this point, it still looks like a weak expansion, but as the global economy slows (India, China, Brazil, Europe, ...) and risks of financial contagion from Europe increase, the recovery is likely to become more fragile.  Add to this uncertainty in terms of tax policy (expiration of many tax cuts at the end of this year) and the economy will continue to struggle through at least early 2013.

I know some readers are probably wondering if there's any good news?  Gas prices are going to continue to decline (wholesale price is $2.65 as of this writing, down 65 cents from its recent high in March).  In addition, both inflation and interest rates are likely to remain low as economic weakness persists.

April Job Report

April's job report was a disappointment, showing a net increase of 115,000 jobs for the month.  In addition, the labor force participation rate dropped to the lowest rate since 1981 as more people dropped out of the labor force.  As discussed previously, part of this was likely due to seasonal adjustments that were distorted by the timing of the worst of the recession (seasonal adjustments post-2009 differ significantly from those pre-2009).  Basically, seasonal adjustments are based on the historical pattern of hirings/layoffs by month.  For example, in a normal January, employment at retailers declines as those hired for Christmas lose their jobs.  The steepest job losses of the recession took place in the January-February 2009, so using those months to estimate seasonal patterns would imply larger than usual layoffs in January and February.  When January and February data are seasonally adjusted in the future (following 2009), more jobs are included to reflect the new seasonal pattern.  In other words, some of the layoffs due to the recession end up being attributed to seasonal factors.  This led to seasonal data overestimating job growth in January-February 2011 and 2012.  Given that seasonally adjusted employment was overestimated early in the year, growth in subsequent months would be undestimated.  Since I raised this issue back in February, it's clear that this is not just an excuse to explain away the most recent reports about the job market.  In addition to seasonal adjustment issues, the warmer than usual weather had an effect as well.  In addition, as noted previously, the relatively strong employment gains earlier this year were hard to justify given the modest economic growth.

On to the details of this month's report.  A relatively high portion of the jobs being created continue to be in relatively low-paying sectors of the economy as accomodation and food services added nearly 27,000 jobs while temp agenices added 21,000 jobs (over 40% of net new job creation).  The index of aggregate hours worked has been flat over the last 2 months, suggesting that economic growth for the second quarter has gotten off to a weak start.  The labor force participation rate for all adults is now the lowest since 1981.  For adult men (20 and older), it's now the lowest on record (records started being kept in 1948) while for adult women, it's the lowest since 1995.  Economist keep waiting for discouraged workers to re-enter the job market, but instead more people keeping dropping out.  Part of it is due to aging of baby boomers, but part is due to economic weakness and may lead to structural problems as the skills of these potential workers continue to deteriorate.

How bad is the news?  Not as bad as it sounds (perhaps due to low expectations!).  The economy continues to grow modestly and jobs are being added, but the job gains reported earlier this year are now generally accepted to have been misleadingly high as the economy still continues to struggle to recover from a historic financial crisis.

March Employment Report

In recent posts, I've noted how the data has presented a mixed message about the economy with the job market indicating a strengthening economy while GDP and other data indicating a more sluggish economy.  Today's job market report suggests that previous job market reports were biased upward, probably due to seasonal adjustments and extra warm weather.  The report indicated that 120,000 jobs were created in March, down considerably from over 200,000 per month in recent months.  In addition, the unemployment rate declined to 8.2%, but this was due to more people leaving the labor force as the household survey (used to estimate the unemployment rate) showed a loss in jobs.  A more precise measure of the labor market is hours worked, which declined in March, led by declines in construction and manufacturing. 
What sectors led to the relative weakness in the job market?  Temp agencies added 55,000 jobs in February, but lost 7500 in March (a difference of 62,500, which accounts for a majority of the decline).  The rest of the weakness appears to be spread throughout other sectors, with slowdowns particularly evident in health care and information services.

Are there any positive news from the report?  Besides the decline in the unemployment rate, the broad measure of unemployment (U6) declined from 14.9% to 14.5%  This was mainly due to a decline in those working part-time for economic reasons.  As part-time employment fell, more people were working full time.

Rather than reflecting a significant slowdown in the job market, I think the report indicates limitations in the data, due to seasonal adjustments and unusually warm weather in many parts of the country.  As noted elsewhere, it's going to be hard for the job market to improve significantly unless economic growth also strengthens, which is not expected in the near future.

Did seasonal adjustments distort the January Job Report?

This post is not designed to be cynical or pessimistic, but to explore possible reasons that the report overestimated the strength of the job market.  Most economic data, including employment data, are seasonally adjusted.  As part of a recent analysis of the job market relative to GDP, Mark Vitner of Wells Fargo examined how seasonal adjustments may be misleading.  It should be noted that this was not written as a way to explain away this morning's job report, but was released on January 31.  Here are a few of his key points:

"The 2007-2009 recession was the deepest recession since the Great Depression, when considering peak-to-trough declines in real GDP. Moreover, some of the largest declines in employment, as well as the largest increases in the unemployment rate, occurred during the fall and early winter months of 2009-2010, with nonfarm payrolls reaching a bottom in February 2010...  This occurrence has likely set the bar very low for employment gains during the winter months in such a way that even normal hiring gains related to the holiday shopping season are showing up as seasonally adjusted employment gains, leading to exaggerated estimates of employment growth.

The seasonal factors used to adjust the unemployment rate were also impacted by the severity of the 2007-2009 recession. The result of this amplitude change is that the seasonal adjustment process has tended to exacerbate downward movements in the unemployment rate during the fall and winter months, while exerting upward pressure on the unemployment rate in the spring and summer months."

In essence, hiring patterns in recent years are used to estimate seasonal adjustments.  Given that some of the worst job losses during the Great Recession took place in the winter (Dec 2008-March 2009), the seasonal adjustments for those months may be biased, resulting in an overestimate of seasonally-adjusted employment growth for those months.  How much of a difference did this make?  If one seasonally adjusts last month's data using the average seasonal adjustment for January for the five years prior to the Great Recession, there would have been 40,000 fewer jobs reported (resulting in an increase of 203,000 jobs as opposed to 243,000).  Thus, a significant portion of the upward surprise appears to be linked to seasonal adjustments that may be biased.

Update (Saturday):

Here’s the math underlying the analysis. The average seasonal adjustment for January data between Jan 2002 and Jan 2009 was about 1.583% (these adjustments were not affected by the financial crisis).  That is, non-seasonally adjusted data are adjusted upward by 1.58% to get the seasonally-adjusted numbers).  Meanwhile, the January 2012 was adjusted upward by about 1.65%.  What difference does that make?

Non-seasonally adjusted employment for January 2012 was 130.263 million and the seasonally-adjusted number was 132.409 million. If one applies the average adjustment from 200522009 (1.58%), the seasonally-adjusted number for January 2012 is 132.321 million, 40,000 less than the official figures.  Thus, it's still a strong report, but probably reflects some bias from the new seasonal adjustment factors (note: this does not account for issues related to warmer than normal temperatures in Jan 2012, etc.).