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By Jason Stipp | 02-04-2011 09:28 AM

Employment Situation Better Than It Looks

A preponderance of evidence points to a job market that's healthier than Friday's report implies.

Jason Stipp: I'm Jason Stipp for Morningstar. We got a decidedly mixed employment report from the government for January. We only added 36,000 jobs to the economy, but the unemployment rate did drop down to 9%. Here with me to dig into the numbers and what might have affected them is Morningstar's Bob Johnson. He is director of economic analysis, and Vishnu Lekraj, he's an equity analyst covering the employment sector. Thanks for joining me, guys.

Vishnu Lekraj: Thank you.

Bob Johnson: Thank you.

Stipp: So, this is the second, somewhat disappointing employment report that we got in a row, because December also was disappointing. We only saw 36,000 jobs added from that establishment survey portion of the report. What do you think was behind that disappointing number? There are several factors that might have contributed to it.

Johnson: Let's look at the establishment survey first, and there were many things, the biggest of which was, weather affected the dataset this time dramatically. You could see it in the actuals, the components of the numbers, things like construction, transportation and couriers, even temporary help, those are all the series that tend to do worst when there is bad weather.

You don't do those activities if there is bad weather, and you tend to lose employment there, and that's absolutely what showed up in the number. We had bad losses in construction, in couriers and in temporary help, which is interesting. Vishnu, you talked about temporary help a little bit yesterday. Is that consistent with what you're seeing.

Lekraj: Not at all. It's like a 180 from what I have been hearing from the temporary help services companies themselves, and a lot of the manager teams do go ahead and look at the numbers, see some things that we don't see, and are very encouraged by what they are seeing, and they are pounding the table for an upswing within the economy. I know today Manpower CEO was there saying that the employment market as a whole was on upswing.

When you look at the categories this month, there was little growth in most of categories, couriers, and like Bob said, and construction fell, which moved the number down. But when you look at other sources, when you look at ADP, when you look at the private sector and you just hear companies on the phone during their earnings this year, it's kind of the opposite.

Stipp: So important to remember that this is a snapshot in time, this report. It happened at distinct point in time when maybe weather was affecting them, but the trend that you're seeing is very different than what we're seeing in this particular snapshot.

So, beyond the weather, though, there were other factors, other adjustment factors, that went into affect in the January report that might have also affected the numbers. Can you talk a little bit about what those were?

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