January 2012 Employment Report

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According to the Bureau of Labor Statistics (BLS) non-farm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent. January’s private-sector job growth was widespread and amounted to +257,000, while government employment shrank by 14,000 (mostly at the local level). The change in total nonfarm payroll employment for November was revised from +100,000 to +157,000, and the change for December was revised from +200,000 to +203,000. Monthly revisions result from additional sample reports and the monthly recalculation of seasonal factors. The BLS’s annual benchmark process also contributed to these revisions.
 

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As we have been pointing out for quite some time, employment is converging with the previous peak at a slower pace than any prior recession going back to 1973. The economy still has 5.6 million fewer jobs than at the beginning of the 2007 recession.
 

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A substantial proportion of the reason for why the unemployment rate fell by 0.2 percentage points can be attributed to the observation that the number of persons not in the labor force exploded by a record 1.2 million in January. In addition, the ratio of employed persons relative to the total population (EPR) has barely budged off its February 2010 low; the EPR is at levels comparable to those seen in the late 1980s.
 

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The civilian labor force participation rate (the share of the population 16 years and older working or seeking work) collapsed to 63.7 percent, the lowest value since May 1983. At the same time, the annual percentage increase in average hourly earnings of production and non-supervisory employees slumped to 1.5 percent, a record low stretching back to when such data began to be collected in 1964. With the price index for urban consumers rising at a 3.0 percent annual pace, wages are falling in real terms (i.e., wage increases are not keeping up with price inflation).
 

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On a somewhat brighter note, full-time employment increased by 80,000; however, part-time employment rose by 132,000. Nonetheless, the declining trend for part-time employment appears to be strengthening; the full-time trend is solidly, although modestly, higher if viewed from January 2010.

In summary, this employment report appears quite positive at first glance, but closer examination reveals serious flaws.