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Podcast: The January Unemployment Report and What It Means for the Economy

I’m Michelle Bazie and I’m here with Chad Stone, the Center’s Chief Economist, to discuss the jobs report for January.

1. Chad, we have another puzzling employment report this month. Employers added only 36,000 jobs to their payrolls in January but the unemployment rate fell to 9 percent. What’s going on?

You’re right, Michelle, that for the second month in a row we are getting conflicting signals about what’s happening in the labor market. As I explained in last month’s podcast on the December jobs report, it’s always important to remember that the payroll employment numbers and the unemployment numbers come from different surveys and don’t always point in the same direction. But the differences in the past two months are really dramatic.

2. How so?

It’s hard to reconcile such small payroll job growth with such a large decline in the unemployment rate. The payroll survey probably understates job growth in January because severe winter weather in some parts of the country probably kept people off the payrolls. The drop in the unemployment rate from 9.4 percent to 9 percent is undeniably large but we’re still waiting to see people coming back into the labor force to look for work in the large numbers that signal a real revival of optimism about prospects for finding a job.

3. Where does that leave you in interpreting recent job reports?

Here’s the bottom line. The labor market is a lot better than it was two years ago when we were hemorrhaging jobs. But, we still have a huge jobs deficit left over from the recession – and nine percent is still a very high unemployment rate. A lot of people who want to be working don’t have jobs and a lot of them don’t show up in the official unemployment rate.

4. Do we have any estimate of how many more people would be working if the economy were operating on all cylinders?

At the beginning of the recession in December 2007, 62.7 percent of the population had a job. That percentage is down to 58.4 percent in January. If we were back where we were at the beginning of the recession, over 10 million more people would have a job.

4. What are policymakers doing to speed up job creation?

Faster job creation requires stronger economic growth than we have seen so far in the recovery. The Federal Reserve has monetary policies in place to support stronger growth. On the fiscal side, the tax-cut and unemployment insurance deal enacted at the end of 2010 is giving the recovery a boost. Unfortunately, House Republican plans for large cuts in discretionary spending would go in the opposite direction. It doesn’t make sense to be stepping on the brakes before the economy has gained the momentum it needs for sustained growth and strong job creation.

Thanks for joining me, Chad.