January Jobs Numbers Low, but Not All Bad News

The Bureau of Labor Statistics said employers added just 111,000 new jobs during January, well below the expected 150,000 that economists were betting on. Sounds like a disappointment, right? Well, maybe not.

Though January jobs numbers missed expectations, November and December results were revised upward -- by a lot. Government economists were able to find an additional 81,000 new jobs in those months. That takes a bit of the sting out of a lower-than-expected month of jobs growth and has been the trend during the past year.

The nation's unemployment rate came in at 4.6 percent during January, an upward tick of a tenth of a point. That's within the survey's margin of error, so it doesn't represent a significant change in the unemployment rate, which has been hovering at a historically low level for more than a year.

What's With All These Revisions?

Recently, this survey is constantly being adjusted up and down months after the government has released the results. But the survey is really quite accurate considering what it measures. While much of the focus is on the monthly change in the nation's payrolls, what the survey really measures is the total population of workers in the United States.

This survey tells us that there were 137,258,000 people working in this country during January. The monthly revisions for November and December represent a change of just 0.03 percent in the overall results. Tiny by anyone's standards.

Raising the Annual Benchmarks

In addition to these monthly revisions, the BLS offers annual "benchmark revisions," by taking a look at the previous 24 months and tuning the results using tax data that is more accurate than the survey. This year's benchmark revision was announced today and found an additional 754,000 workers in March of 2006.

This is done to provide the most accurate picture of what's happening in the jobs market so economists, companies and job seekers can base decisions on what's really happening in the market.

In the end, we should expect that the headline number is a best guess and will get better in the months following its release. That's what traders are increasingly doing.

So, what does this mean for the economy? We're in a period of solid jobs growth and low unemployment. That equation is setting the stage for strong wage growth (today's survey shows that wages increased by 4 percent during the past year). Jobs growth has averaged 179,000 per month during the past 12 months.

At this point, workers should be looking for a bit more in the pay envelope as employers compete to keep current workers happy and attract increasingly rare talent to join their ranks.

Where Were the Jobs Added Last Month?

The story in January is pretty much what it has been for months. Most of the nation's jobs growth is coming from the service sector (+104,000) while the goods producing sector (+7,000) languishes.

One bit of surprising news -- construction jobs (+22,000) ticked up. Could that be a hint of a rebound in the real estate market? Probably not. Most of the new jobs are coming in non-residential construction (+18,600) while residential contractors (-4,800) keep laying people off.

Retail (+4,000) was pretty much flat for the month after the holiday season, but health care (+18,400) kept adding workers. Restaurants and bars (+20,900), temp agencies (+5,700) and architectural/engineering offices (+9,100) also were hiring during January.

How much does this matter? This is important. The jobs report is arguably one of the most important economic indicators out there -- and it's easy to understand.