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U.S. unemployment rate down but job creation is stagnant, data show

WASHINGTON — Job creation came nearly to a halt in January, yet the unemployment rate plummeted to 9 percent, according to a new report that gives a muddled picture of the state of the labor market.

Employers added 36,000 jobs last month, the Labor Department said Friday, far fewer than the 145,000 economists had forecast, and it was the weakest month of job creation since September. The surprisingly low numbers suggest that last month's snowstorms probably kept people from looking for work.

The unemployment rate fell to 9 percent from 9.4 percent, the second straight month of steep decline, as the number of people describing themselves as employed rose by 589,000. The jobless rate was 9.8 percent in November, and economists believed it would take until the end of this year for it to decline to 9 percent. Instead, it reached that level the first month of the year.

The two numbers are based on separate surveys — of employers for the job growth data and of households for the unemployment rate — but usually show similar trends over time. That made the January report a mystifying blend of mixed signals. Economists were expecting the opposite outcome: for job creation to accelerate as the economy strengthened, and for the jobless rate to climb as unemployed workers started looking for work again.

"The drop in the unemployment rate is actually very encouraging," said Paul Ashworth, chief U.S. economist at Capital Economics, while attributing the weak job creation number largely to weather.

Gary Burtless, a senior fellow at the Brookings Institution, said the report "offers a puzzling and mixed picture of the health of the current job market … in the past couple of months."

The lower jobless rate requires some statistical parsing. The Bureau of Labor Statistics, as it does every January, updated its estimate of the U.S. population. This year, the bureau estimated that the population fell by 347,000, which caused the proportion of people working to accelerate more than it would have if the population estimate had remained steady.

The White House called the decline in the jobless rate a "welcome development" but generally refrained from celebrating the numbers, given the uneven picture they paint.

"The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead," White House Council of Economic Advisers Chairman Austan Goolsbee said in a statement.

But House Speaker John Boehner, R-Ohio, said the weak job creation shows that the Obama administration's push to speed the economic recovery isn't working.

"The spending binge is hurting job creation," Boehner said in a statement, "eroding confidence, draining funds away from private investment and spreading uncertainty among job creators."

If analysts are correct that the weak job creation was driven more by weather than by a fundamental softness in the economy, a bounce-back effect should show stronger job growth in February and March.

U.S. unemployment rate down but job creation is stagnant, data show 02/04/11 [Last modified: Friday, February 4, 2011 8:48pm]
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