Unemployment rate falls to 9 percent; 36,000 jobs added

The nation’s unemployment rate dropped to 9 percent in
January, but job growth remained anemic, with the economy adding only 36,000
jobs.

The sharp drop in the labor force over the past two months
reflects a decline in the number of people looking for work. Unemployment stood at
9.4 percent in December, 9.8 percent in November.

{mosads}The number of jobs added in January fell well short of expectations and will raise more questions about why the labor market is not improving more rapidly as other economic indicators suggest an improving economy. Private companies added 50,000 jobs, while state and local governments cut 14,000. Bad winter weather might have contributed to the disappointing figures.

The sluggish growth comes as the debate in Washington over
spending turns fierce. House Republicans announced a budget ceiling for
the current fiscal year on Thursday that would cut $32 billion from current
spending. Democrats and the White House have warned that steep cuts could set back the economy and lead to a jump in the unemployment rate.

Speaker John Boehner (R-Ohio) hit President Obama over spending in his comments on the report. Boehner blasted the 2009 economic stimulus package in a statement about the January 2011 figures, saying the $787 billion legislation “isn’t working” and failed to keep unemployment below 8 percent. 

Boehner also used the job figures to hit the president over an expected vote on raising the country’s $14.3 trillion debt ceiling. “And now the president is asking for an increase in the national debt limit without any commitment to stopping the spending binge that has shackled our economy,” Boehner said in a statement. 

Republicans are demanding steep spending cuts in exchange for their support in raising the debt ceiling. Obama proposed a five-year freeze on non-security discretionary spending in his State of the Union address, but Treasury Secretary Timothy Geithner has warned that raising the debt ceiling cannot be avoided. 

A failure to do so, Geithner has warned, could lead to a U.S. default and a catastrophic effect on the U.S. economy. Federal Reserve Chairman Ben Bernanke on Thursday warned lawmakers not to use the debt ceiling as a bargaining chip, and also said it would be a catastrophe if the ceiling was not lifted. 

Obama generally has offered comments the day the unemployment report is released, but is not scheduled to address the job numbers on Friday. Obama is meeting with Canadian Prime Minister Stephen Harper, and the two will hold a joint press conference Friday afternoon.

Austan Goolsbee, chairman of Obama’s council of economic advisers, emphasized the sharp drop in the unemployment rate in a post on the White House blog about the figures. He said the overall trend of economic data remains encouraging, but said unemployment remains too high and warned against reading too much into a single monthly report.

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One bit of good news in the report were revised job figures
for the last two months that showed the economy adding 40,000 more jobs in
November and December than previously estimated.

Employment rose in manufacturing and in retail, but was down in construction, transportation and warehousing. 

Weather might have had an impact on the figures, with strong winter storms in January holding back growth. The Labor report said construction jobs in particular might have been held back by the wintry weather.

But the biggest reason why the unemployment rate fell while the private sector created a relatively small number of jobs is the decline in the U.S. workforce. 

A report Friday from the Economic Policy Institute found that the workforce has declined by 750,000 workers since the start of the recession, when it should have gained roughly 4.1 million workers given working-age population growth. 

If just half of these “missing workers” returned to the labor force, the unemployment rate would be 10.5 percent instead of 9 percent. None of these workers are reflected in the official report from Labor, but their re-entry to the workforce will make it tough to keep the unemployment rate from rising.

This story was last updated at 12:05 p.m.