Statement: Chad Stone, Chief Economist, on the January Employment Report

Today's jobs report shows that job losses have slowed to a trickle
compared with what they were in the months just before President Obama
and Congress enacted the American Recovery and Reinvestment Act (ARRA)
last February. But it also highlights the huge jobs deficit that
remains the legacy of the longest and most severe recession since the
Great Depression. Temporary recovery measures that extend or expand on
ARRA remain vital to putting the economy on a path that will close that
jobs deficit.

Although nonfarm payroll employment was
essentially unchanged in January, revisions to the jobs data going back
to 2008 raised the estimated cumulative job losses since the start of
the recession in December 2007 to 8.4 million. The current jobs deficit
is much larger than in previous recessions (see chart). The economy
would have to create an average of 350,000 jobs a month for two years
just to return to the December 2007 level of employment - and even more
to restore full employment, since the population and potential labor
force are now larger. Most forecasters expect the economy to grow much
more slowly than that, especially as ARRA winds down.

The
President's fiscal year 2011 budget, which he released on Monday,
proposes $266 billion of additional temporary recovery measures to
stimulate the economy. They include an extension of the ARRA measures
providing extra weeks of unemployment insurance and subsidized COBRA
health insurance coverage for unemployed workers and fiscal relief for
states facing severe budget shortfalls, as well as $100 billion for new
jobs initiatives. These measures are designed to have their maximum
impact on the economy over the next two years, and like ARRA, they are
temporary measures that do not add significantly to the long-run budget
deficit.

Such temporary recovery measures are needed when there
is a significant jobs deficit that is not closing quickly. Once a
sustainable recovery is underway, policymakers must restore fiscal
discipline and reduce the budget deficit to sustainable levels in order
to promote long-term growth and prosperity. But too much deficit
reduction too soon could derail the recovery and be counterproductive
to those long-term goals.

About the January Jobs Report

While the labor market is stabilizing after a long deterioration, conditions remain harsh for job-seekers.

• Private
  and government payrolls combined shrank by 20,000 jobs in January.
  Revisions to the payroll employment data back to April 2008 show that
  the economy shed 1.4 million more jobs through December 2009 than
  previously reported. The new data show that net job losses since the
  recession began in December 2007 total 8.4 million. (Private sector
  payrolls have shrunk by 8.5 million jobs over the period.)
• The
  pace of job losses has slowed markedly - to an average of just 35,000
  per month over the past three months, compared with an average of
  732,000 jobs per month over the period of greatest job losses (November
  2008 through March 2009).

  The unemployment rate dropped
  unexpectedly to 9.7 percent in January and is under 10 percent for the
  first time since September 2009. That, however, is still 4.7 percentage
  points higher than at the start of the recession.

• More
  people entered the labor force than left it in January and the labor
  force participation rate edged up to 64.7 percent. The combination of
  an increase in labor force participation and a drop in the unemployment
  rate resulted in a rise in the percentage of the population with a job
  from 58.2 percent to 58.4 percent. Nevertheless, both the labor force
  participation rate and the percentage of the population with a job
  remain near lows that were last seen in 1985.
• The Labor
  Department's most comprehensive alternative unemployment rate measure -
  which includes people who want to work but are discouraged from looking
  and people working part time because they can't find full-time jobs -
  fell from 17.3 to 16.5 percent in January. That figure is still very
  high but nearly a point below the 17.4 percent reached in October 2009.
• Long-term
  unemployment remains a significant concern. Over two-fifths (41.2
  percent) of the 14.8 million people who are unemployed have been
  looking for work for 27 weeks or longer. That's the highest percentage
  on record in data going back to 1948. Regular unemployment insurance
  benefits typically run out after 26 weeks.