The jobs report on Friday showed a decline in the unemployment rate from 8.5 percent in December to 8.3 percent in January. With this decline, the unemployment rate has now fallen 0.8 percentage points over the past five months.
An encouraging piece of news is that this is due to people going into jobs and not due to people dropping out of the labor force. While the labor force participation fell in January from 64.0 percent to 63.7 percent, this is purely the result of a technical revision the Bureau of Labor Statistics (BLS) does every year. With each January’s report, BLS updates its adjustments for population and this year the update was based on the 2010 Census. According to the 2010 Census, population grew mainly among younger and older individuals and among immigrant women. All these groups have lower participation rates, so this adjustment brought down participation down by 0.3 percentage points. Thus, excluding the impact of these technical adjustments, the labor force remained unchanged from December’s level.
Further underlying the good news is that the steady decline in the unemployment rate is being driven by more people finding jobs rather than because people have stopped looking for work. The number of unemployed people has fallen by 1.2 million, while the number of people with jobs has risen by 1.9 million over the past five months. A broad measure of the share of the population with a job, the employment-to-population ratio has ticked up from 58.3 percent in August 2011 to 58.5 percent in January.
January’s decline in the unemployment rate was broad based with all racial and ethnic groups seeing declines. The drop in the unemployment rate was especially sharp among African-Americans. Over-the-month, their unemployment rate fell from 15.8 to 13.6 percent. While a decline in the labor force participation rate accounted for part of this decline (0.4 percentage points and much of this decline was due to the population adjustment), it was primarily driven by a sharp increase in employment. While these measures can be volatile on a monthly basis and were impacted by some technical adjustments to the survey, the African-American unemployment rate has been steadily trending down from its high of 16.7 percent in August 2011.
Hispanics also experienced declines in their unemployment rate in January. The unemployment rate among Hispanics fell to 10.5 percent from 11.0 percent in December. The rate has been steadily trending down since November 2010, and it has fallen 0.8 percent points since August.