Unemployment Rate Falls, But Job Losses Continue

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The Labor Department on Friday said U.S. employers cut 20,000 jobs last month — but the unemployment rate fell to 9.7 percent.

RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. I'm Renee Montagne.

LINDA WERTHEIMER, host:

And I'm Linda Wertheimer in for Steve Inskeep.

The U.S. unemployment rate fell below 10 percent to 9.7 last month. The drop was a big surprise. Most economists have been expecting the jobless rate to stay the same or rise above 10 percent, where it was in December. Meanwhile, businesses reported they cut 20,000 jobs overall in January.

NPR's John Ydstie joins us to talk about these two numbers. So how can we have a big drop in the unemployment rate and business is still cutting jobs?

JOHN YDSTIE: Well, the main reason is that the two numbers come from different surveys. The unemployment rate is determined by a survey of households and the payroll job losses or gains are determined by a survey of business establishments. The two surveys line up over time, but they can diverge in any single month.

WERTHEIMER: Well, let's talk about the drop of the unemployment rate from 10 to 9.7. What happened to make it drop?

YDSTIE: Well, according to the Bureau of Labor Statistics, the number of employed Americans rose by more - by about 540,000. That's a big swing, a big difference between the two establishments. But it can happen in the household survey, and that's what drove the unemployment rate down.

WERTHEIMER: Then the survey of business establishments showed a loss of 20,000 payroll jobs - pretty hard to describe the two numbers?

YDSTIE: It is. And in addition, there was an annual revision of the payroll survey this month, that made it even more confusing. It showed a big increase in the number of jobs lost over the last year. And the total net number of jobs lost since of the recession back in December of 2007 is now put at 8.4 million.

There were other revisions, too. Last month, it was reported that in November there was a gain of 4,000 jobs, but that's been revised up to an increase of 64,000 jobs in November. But the December job losses were also larger than previously reported, 150,000 jobs lost in December instead of 85,000 jobs lost. And then, of course, we had the net loss of 20,000 jobs in January.

WERTHEIMER: So this all sounds very confusing, John. Is it good news or is it bad news?

YDSTIE: Well, it's hard to tell. As one analyst put it, there's a lot of good and a lot of bad and a lot of mud in this report. I think what we can say is that things are very slowly getting better. For instance, there were significant job gains in manufacturing and services and retail in January -that's some good news. And the household survey conclusion that more people are employed is good news. There was also a slight uptick in the number of hours worked. Manufacturing overtime increased and average hourly earnings were up a nickel.

WERTHEIMER: But the headline number of course is the drop in the unemployment rate. So is that a boost for the people that are trying to manage the economy?

YDSTIE: I think it is because I think it gives a sense of confidence to people. That's the number that people absorb from a report like this. There's a blizzard of numbers that come out and this is the one that really sticks. It's certainly a number the White House will focus on as it continues to beat the drum for job creation.

And to add to that, the fact that the number of jobs lost in January was relatively small and that we reported a big growth number last week...

WERTHEIMER: The economy growing.

YDSTIE: The economy growing. The economy growing, 5.7 percent in the fourth quarter of last year. And many economists think that's going to be revised up. So, I think there should be a spillover in confidence.

WERTHEIMER: And confidence of course is what moves the economy. People are confident that things are getting better so they start hiring.

YDSTIE: Right. The two go together. Consumers are bit more confident and start spending then businesses will come around, too.

WERTHEIMER: NPR's John Ydstie, thanks very much.

YDSTIE: You're welcome, Linda.

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