If businesses had any reluctance to hire in December because of fiscal cliff concerns, they didn’t make up for it in January: Payrolls expanded by 157,000, down from December, but the unemployment rate moved to 7.9 percent from 7.8 percent a month earlier, the Bureau of Labor Statistics (BLS) reported Friday.

Economists had forecast payrolls would grow by 160,000 and that the unemployment rate would remain at 7.8 percent.

Job growth for December, originally reported at 155,000, was revised upward to 196,000. November’s growth was revised to 247,000 from 161,000.

BLS also reported revisions back to January 2012, noting payrolls that month grew 311,000 instead of the originally reported 275,000.

With the revisions, payrolls in the fourth quarter grew 603,000 compared with 456,000 in the third quarter, 324,000 in the second, and 787,000 in the first, even though the Bureau of Economic Analysis (BEA) reportedgross domestic product contracted by 0.1 percent.

According to the report, average weekly hours for all employees remained at 34.4 while average hourly earnings edged up four cents, translating to only a slight increase in aggregate earnings. With the end of the payroll tax “holiday” in January, disposable income available for consumption was reduced.

While the unemployment rate rose, the employment-population ratio, which compares employment to the entire over-16 population, was unchanged at 58.6 percent. When the recession hit in December 2007, the ratio was 62.7, which meant then that 31.3 percent of those over 16 were not employed compared with 41.4 percent in January.

The BLS report included two major revisions: the application of “population controls” to the household survey, which develops the unemployment rate among other measures and benchmark revisions to the establishment survey which tracks payrolls. The benchmark revisions are applied historically while the population controls are not.

The payroll report changes showed the nation added 2,171,000 jobs in 2012 compared with the 1,835,000 jobs originally reported. The benchmark changes are based on federal unemployment tax returns filed each March, which give BLS a precise reading on the number of business establishments it samples for the payroll data. Between the annual revisions, BLS applies a statistical “birth-death” model to estimate businesses which cease operations and new companies.

Because the population survey is not revised historically, comparisons between the January data and other months or years are less accurate and indeed not reported by BLS; the comparable data is published instead.


Based on that comparable data, the labor force—the sum of those employed and unemployed—appeared to increase in January by 143,000. The number of unemployed persons—those meeting three criteria: out of work, available for work, and looking for work—increased 126,000. The increases in both the numerator and denominator of the unemployment rate calculation resulted in the increase in the unemployment rate. According to BLS’ other data tracking the reason for unemployment, the number of “re-entrants”—those who had not been looking for work—dropped in January to 3,515,000 from 3,587,000.

Other indicators that might have explained the increase in the unemployment rate (despite the increase in payroll jobs) also fell short, but again, month-over-month comparisons are not precise. The number of multiple jobholders, for example, dropped 98,000 in January to 6,919,000, and the number of self-employed workers fell 161,000.

The unemployment rate for people who did not graduate high school appeared to increase to 12.0 percent from 11.7 percent in December, while the unemployment rate for college graduates showed a decline to 3.7 percent from 3.9 percent. College graduates are more likely to own homes than those who do not have college degrees, so the drop in that unemployment rate could show up in improved mortgage delinquency statistics.

Virtually every industry sector showed an increase in payroll jobs, though government payrolls dropped 9,000 as local government payrolls dropped by 6,000 and federal payrolls contracted by 5,000, both offset by an increase in state payrolls.

Transportation and warehousing sector payrolls shrank by 14,200 as the number of courier and messenger jobs fell 18,500 but were offset by hiring in other sub-sectors. The number of courier-messenger jobs typically increases at the end of the year with layoffs following in January. The number of temporary jobs also dropped in January, a positive sign suggesting employers might be confident enough to hire permanent employees.

The retail sector, according to the report, added 32,600 jobs followed by gains in construction (28,000 jobs), health care (27,600), professional and business services (25,000), leisure and hospitality (23,000), and wholesale trade (14,800).

Within the financial sector (which added 6,000 jobs) the number of real estate jobs grew 5,000, and there were 2,600 new underwriting positions. The number of insurance jobs dropped, as did rental and leasing services jobs.

The unemployment rate has added significance with the announcement by the Federal Reserve that the target fed funds rate would remain at its historic low, 0 to 0.25 percent, at least until the unemployment rate fell below 6.5 percent. The Fed also set an inflation target for keeping rates low.

The ranks of the long-term unemployed—those out of work for 27 weeks or longer—dipped slightly to 4,708,000, the lowest level since June 2009, but the number of persons out of work for 5 to 14 weeks increased to 3,028,000 from 2,838,000, reflecting the layoffs of holiday workers.

The number of “job leavers,” which includes those who quit one job to look or take another—a sign of confidence—dropped 2,000 in January, while the number of job “losers” fell 71,000.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 a.m. and again at 9:40 a.m. Eastern time.