National Unemployment Rate Falls to 9%

The nation's unemployment rate dropped to 9.0 percent in January, although employers added just 36,000 jobs to their payrolls, according to ""figures just released"":http://www.bls.gov/news.release/empsit.nr0.htm by the Department of Labor.

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January’s rate is down from 9.4 percent in December, and is the lowest jobless reading reported by the federal government in two years.

The market was expecting the drop. The ""Dow Jones Industrial Average"":http://www.marketwatch.com/investing/index/INDU broke 12,000 on Thursday in anticipation of the decline. Analysts were looking for a healthier number of new jobs to be added during the month, however. Winter weather conditions are being blamed for the worse-than-hoped results.

Paul Ashworth, chief U.S. economist for the research firm ""Capital Economics"":http://www.capitaleconomics.com, said, “The severe winter weather … appears to explain most of the weakness in January's U.S. non-farm payrolls, which increased by only 36,000, compared with a 121,000 gain the month before.”

The Labor Department’s latest report includes revisions to its labor force benchmarks, incorporating new population controls into the January data.

Ashworth notes that the Department doesn’t revise the historical figures, which “generates a discontinuity between the figures for December and January.”

As Ashworth explained, the Bureau of Labor Statistics now thinks the population is smaller than it did before, so it revised down the levels of the labor force and employment by roughly 500,000 for January, but not December.

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“Stripping out that one-off adjustment, it is better to think of the decline in the unemployment rate as being driven by a massive 600,000 increase in employment (far beyond the non-farm payroll gain), while the labor force was basically unchanged,” Ashworth said. “In other words, the drop in the unemployment rate is actually very encouraging.”

Experts agree that job growth is vital to any meaningful improvement in the housing and mortgage markets â€" key to reducing early delinquencies in consumer and mortgage credit and to providing potential homebuyers with a sense of financial security.

Nigel Gault, chief U.S. economist for ""IHS Global Insight"":http://www.ihsglobalinsight.com, says the good news is that the decline in the unemployment rate of 0.4 percentage point reflects more people finding jobs, not more people giving up and leaving the labor force.

“The payroll details and the drop in unemployment signal that there is an underlying improvement in the labor market buried under the snow and ice,” Gault said.

The sharp drop in the overall unemployment rate could serve to boost consumer confidence for some and stoke sentiments that the economic recovery is gaining momentum. For those that are out of work, though, the improved number will likely do little to ease their frustration.

According to the Department of Labor, 2.8 million persons were “marginally attached to the labor force” in January. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months, but they were not counted as unemployed because they had not searched for work in the four weeks preceding the Department’s January survey.

Among the marginally attached, there were 1.0 million workers described as “discouraged.” Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.

The data show that there are 6.2 million people deemed to be “long-term unemployed,” meaning they have been without a job for 27 weeks or more. They accounted for 43.8 percent of the nation’s unemployed population.