January Job Loss a New Sign of Economic Woes

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The U.S. economy lost jobs in January, according to the monthly employment report released Friday by the Labor Department. It marks the first monthly decline in employer payrolls in four-and-a-half years.

RENEE MONTAGNE, Host:

New unemployment numbers are out today, and the news isn't good. The U.S. economy lost jobs in January, 17,000 of them. That's according to the monthly employment report released by the Labor Department. It's the first decline in employer payrolls in four and half years. There were a couple of bright spots. Among them, the unemployment rate ticked down a notch, to 4.9 percent.

Joining us now to make sense of it all is NPR's Adam Davidson. And overall, Adam, this is a very weak report.

ADAM DAVIDSON: Yeah, this is bad news for the overall economy. Payrolls were down 17,000, which might not sound like a huge number in an economy that has a 150 million jobs. But as you said, this is the first time that the jobs number fell from one month to the next since the summer of 2003. And that's a big deal, that it went negative at all.

Usually, since our economy is growing, our country is growing, the number increases every month, well over a hundred thousand. It's been slowing down for the last six months or so. And economists had predicted it would be a slowdown, that we'd only get around 80,000 new jobs in January, which is a smaller number than usual. But it fell dramatically less than that.

Although I should note these numbers are often revised later, so it might not be as bad as it sounds.

MONTAGNE: Now, I just reported that the unemployment rate fell. But that is a little confusing. If the number of jobs fell, wouldn't the unemployment rate go up?

DAVIDSON: I know. This is one that gets me every month. The unemployment rate - there's a number of jobs and then there's a percentage of jobs for the people looking for jobs. So they only count people looking for jobs. So what this tells us is that fewer people were out there looking for jobs. And fewer people considered themselves in the workforce. This might be older people who retired or younger people going back to school or someone who got injured; that kind of thing.

Some economists say it's actually a bad sign when the jobs number goes down and the unemployment rate goes down because that will - what that tells you is that there are at least some people in the economy who are so depressed about the future, they're not even bothering to look for jobs. Although it's hard to know how many of those people we're talking about.

MONTAGNE: So does this report validate the Fed's dramatic rate cuts over the past couple of weeks?

DAVIDSON: It seems to, yes. I mean, there's been a lot of talk about how Ben Bernanke and the Federal Reserve way overshot by cutting interest rates so dramatically. This is the kind of number that tells us maybe they knew something we didn't know.

It's so hard to do that job. It's so hard to know where we are in the cycle, where we are in the slowing cycle. But they do have data that the rest of us don't have, and this does seem to validate their choice.

MONTAGNE: And can we now say that the economy has slowed down so much that there was a net loss in jobs and thus we must be in a recession?

DAVIDSON: We can't say that yet. A real recession, you're talking about a hundred thousand, 200,000 jobs lost each month, the payroll number falling much more than it did last month. So this is a sign of a clearly slowing economy. It may be the first harbinger of a recession. But it is not yet a recession.

MONTAGNE: Adam, thanks very much.

DAVIDSON: Thank you, Renee.

MONTAGNE: NPR's Adam Davidson.

And here's another story we're following today. Microsoft is making a big play for Yahoo. The company is offering almost $45 billion in cash and stock to buy the Internet giant. It's an unsolicited takeover bid, and if the deal goes through, it would be a significant challenge to Google, the company that dominates the online search and advertising markets.

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