The nation's unemployment rate dropped from 9.4 percent to 9.0 percent in January, according to the U.S. Labor Department. However, the improvement in the rate was not reflected in job creation.
According to the monthly report, only 36,000 new payroll jobs were added, hardly enough to sustain a recovery, according to economists. But economists who read deeper into the report found some reason for optimism.
"The details of the payroll portion of the report were really not that bad," said economist Joel Naroff, of Naroff Economic Advisors, in Holland, Pa. "Strong gains were seen in the vehicle, computers and machinery and electronics manufacturing industries. This reinforces the view that businesses are investing strongly and households are beginning to buy big-ticket items again."
The report also shows that retailers added lots of people and there were increases in health care, wholesalers and professional and business services. However, the brutal winter weather looks like it really hammered some sectors. There was a huge decline in construction.
There was evidence that, despite improving conditions in the private sector, the public sector is only now beginning to feel the pinch. The report shows increasing stress on state and local governments as a growing number of positions are being cut.
"As for the unemployment rate, there was a huge decline in the number of people saying they are unemployed," Naroff said. "There were fewer people underemployed as well. The details of the household portion of the report all point to a firming in the labor market."
Naroff thinks the report's biggest impact may be psychological. When the average person looks at the numbers, he says, it just may be the sharp drop in the unemployment rate that resonates. While it is still way too high, he says it has come down dramatically over the past two months and that could help consumer confidence.
"Regardless, the labor market is not in great shape but it is clearly a whole lot better than a year ago," Naroff said.