US unemployment down in January as jobless give up

Jobseekers queue at an employment centre in Las Vegas
Image caption The fall in unemployment may have been due in large part to job-seekers giving up on finding work

US unemployment fell in January to 9% from 9.4% a month earlier, the Department of Labor said.

It is the second such monthly fall, after unemployment fell from a rate of 9.8% in November.

But despite this, the number of jobs created, at 36,000, was far below the expected 140,000.

The poor figure may have been due to blizzards during January, which are thought to have kept many workers at home.


The total number of unemployed fell by 600,000 versus December, according to the data released by the Bureau of Labor Statistics.

Some economists interpreted the drop in unemployment as symptomatic of a long-term decline in overall employment levels.

As job-seekers give up looking for work, they ceased to be classified as unemployed.

Markets took some time to digest the ambiguous data.

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The euro initially jumped half a cent against the dollar, suggesting traders respnoded badly to the headline job creation figure.

But then it almost immediately dropped back, resulting in a fall of more than half a cent on the day, as the market seemingly took a more optimistic view on the data's implications for the US recovery.

Winter blues

The number of new private sector jobs - at 50,000 - was also well below expectations of 150,000, which had been built up by a sustained fall in unemployment benefit claims in recent months, as well as strong industry survey data.

Most of the new jobs created came in manufacturing (up 49,000), particularly in durable goods such as car construction.

The retail sector added a further 28,000, and healthcare 11,000.

However, these gains were partly offset by continued job losses in other parts of the economy, notably construction where employment fell 32,000.

The US housing and commercial property markets continue to be heavily depressed, although the Department suggested the January data may have been affected by "severe winter weather".

A separate household survey carried out by the department found that 866,000 people did not work in January because of the weather conditions.

"The severe winter weather that occurred during the sample week appears to explain most of the weakness," said Paul Ashworth, chief economist at Capital Economics in Toronto.

The weather may also have had a hand in a 38,000 drop in employment in transport and warehousing, with the brunt borne by couriers.

Low participation

There were some positive signs in the data, such as:

  • the number of long-term unemployed fell slightly to 6.2 million
  • those working part-time because they cannot find full-time work fell to 8.4 million from 8.9 million
  • job creations for the previous two months were revised up by a total of 40,000

Opinions on the seemingly contradictory numbers differed greatly.

Many economists blamed the poor job creation number on the dreadful weather and data revisions.

Others said it evidenced a continuing long-term decline in overall employment levels.

The labour force participation rate - which calculates the number of workers, both employed and unemployed, as a percentage of the working-age population - declined to 64.2%, according to Bill McBride of the economics blog Calculated Risk.

"This is the lowest level since the early '80s," he notes. "The participation rate is well below the 66% to 67% rate that was normal over the last 20 years."


Others still admitted their exasperation at reading between the lines.

"I don't even know what to think, to be honest," said Dan Cook, senior market analyst at IG economics.

"Last month we saw a drop in the unemployment rate that was sizable, now it's dropped down to 9%, yet we only added 36,000 jobs.

"My first question is where are all the workers going - are they all just giving up? Right now, as a market participant myself I am having trouble what to make of this data."

The apparent contradiction may also be due to the fact that the data come from two different sources.

The unemployment figure is based on a survey of households, whereas the job creation number comes from a separate survey of employers.

North of the border

Meanwhile, in Canada the jobs data for January appeared to move in the opposite direction.

Some 69,000 new positions were created - nearly double the figure in the US, despite Canada having little over a tenth of its southern neighbour's population.

Yet the unemployment rate actually increased by 0.2% to 7.8% - still well below the US - as many of those out of work decided to begin actively looking again, meaning they re-entered the official jobless total.

Again in contrast to the US, the construction sector added jobs during the month.

Canada was hit by the same blizzards that affected the US eastern seaboard last month.

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