Wall Street was greeted with a disappointing – and somewhat confusing – report on the employment market Friday morning, suggesting recent signs of economic strength aren’t translating into more jobs.
The Labor Department said just 36,000 jobs were created last month, far shy of the 145,000 that were expected. The unemployment report, meanwhile, plunged to 9% from 9.4%, the lowest level since April 2009 and an improvement on the 9.5% that economists were expecting.
December’s number was revised to show an increase of 121,000 jobs, up from the original estimate of 103,000. Manufacturing employment rose, as did retail employment, but construction employment fell.
The discrepancy between the soft payrolls reading and the big drop in the unemployment rate stems from the fact that they are derived from two different surveys – an establishment survey, which tallies actual payroll numbers from businesses, and a household survey, which computes the unemployment rate.
The payroll number took a big hit from the bad weather last month. The Labor Department said the bad weather prevented nearly 900,000 Americans from making it to work in the January survey week. Meanwhile, about 500,000 people dropped out of the workforce, which skews the percentage of unemployed lower despite the small increase in actual payrolls.
Private sector employers increased payrolls by 50,000, while the government shed 14,000 jobs.
The report is particularly disappointing because recent signs from private payroll surveys and readings on both the manufacturing and services industries have showed an uptick in activity. Consumer spending is also perking up.
However, one major overhang for the economy – the real estate market – is highly dependent on the jobs market, and until a sustainable bump in jobs is seen, the housing market will continue to suffer.