Unemployment Drops To 5.6%

WSJ.com – Payrolls Grow by 112,000 Jobs As Unemployment Rate Drops
This is a surprisingly sour report given that the unemployment rate dropped to 5.6% and the economy created 112,000 new jobs. The jobs number didn’t “meet expectations” and the jobs were created in industries that apparently usually shed jobs in January, such as construction and retail.

I’m still having a hard time seeing the downside of this. If your memory only goes back five years it will be disappointing, but as recently as 1995 an unemployment rate this low was considered a harbinger of inflation.

Likewise, “expectations” have been set that the economy create 200,000 net new jobs each month for the rest of the year. If that doesn’t happen, but 150,000 jobs are created each month and unemployment declines, that would seem to be a good thing to me.

Payrolls grew in January at the fastest clip in three years but fell short of expectations.

Nonfarm businesses added 112,000 jobs in January. It was the largest gain since December 2000, when companies added 124,000 positions, and was well above the revised 16,000 gain in jobs seen at the end of last year. December’s gain had initially been estimated at 1,000 jobs.

However, January’s number was far below the 160,000 jobs economists had been expecting, according to a survey by Dow Jones Newswires and CNBC.

“The number was very disappointing,” said Dominic Konstam, head of interest-rate strategy at Credit Suisse First Boston in New York. “We’re not getting the jobs to replace the stimulus [in the economy], which will fade once the first quarter passes,” he said, adding that this will complicate the economic recovery later this year.

William Sullivan, market economist at Morgan Stanley, said, “the level of job creation is well under expectations and certainly disappointing for the 26th month of an alleged economic recovery.”

The unemployment rate fell a tenth of a percentage point to 5.6%, the lowest rate since the 5.4% recorded in October 2001. Economists had expected the rate to tick up a tenth of a percentage point to 5.8%.

UPDATE: Xrlq (Jeff) has more. BTW, I’ve gotten used to seeing the name “Xrlq” so many times and associating it with “Jeff” that I’ve actually started to pronounce it that way. Talk about conditioning….

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