Employment report is same old story

The story is getting old.

The latest employment report was a downer, especially when compared to the garden variety of data supporting the notion that the U.S. economy is gaining strength.

Stronger U.S. job gains are coming soon!

The U.S. economy added a disappointing 103,000 net new jobs during December, roughly 60,000 less than expected. Better news saw previously reported employment gains for October and November revised higher by 70,000 jobs.

That 9.4 percent rate

Noteworthy in the report was the sharp decline in the nation's unemployment rate from 9.8 percent in November to 9.4 percent in December, the lowest level in 19 months, and the largest monthly decline in more than 12 years. Economists had expected a much smaller decline.

The nation's unemployment (or jobless) rate can fall sharply for two fundamental reasons. The first would be a strong surge in job creation (the good reason). The second would be a sharp decline in the estimated labor force (the bad reason).

In reality, it was a combination of the two

Survey times two

This part requires some explanation, so bear with me.

The employment data noted here comes from two separate and distinct surveys. The 103,000 estimated net gain in employment comes from the "establishment" survey. The U.S. Labor Department's Bureau of Labor Statistics (BLS) surveys roughly 140,000 businesses and government agencies each month, covering roughly 400,000 work locations.

The nation's unemployment rate results from a smaller survey (also by BLS) of roughly 60,000 households each month. The BLS then estimates the size of the labor force, the number of employed people and the resulting number of unemployed people. Note that you have to be seeking employment to be counted as unemployed.

The latest "household" survey indicated a 260,000 contraction in the estimated labor force, a sign that more people had become discouraged about finding a job and had stopped looking … thereby no longer counted as unemployed. At the same time, the household survey noted a rise of 297,000 people who were now employed. These two figures led to a 557,000 decline in the number of people counted as unemployed, from 15,041,000 to 14,485,000, resulting in the decline from a 9.8 percent rate to 9.4 percent.