The Bureau of Labor Statistics (BLS) reported this morning that nonfarm payroll employment increased by 243,000 during January 2012 and that the unemployment rate declined to 8.3%.

Payroll Employment

Nonfarm payroll employment jumped by 243,000 during January.  This is significantly higher than the consensus estimate of private forecasters who were looking for a gain of roughly 130,000 payroll jobs for the month.  Over the past year, total nonfarm payrolls are up by 1.953 million or 1.5%.   Private sector payrolls jumped by 257,000 during January.  Over the year, private sector payrolls are up by 2.229 million or 2.1%.  Government payrolls declined by 14,000 during the month and 276,000 or 1.2% over the last twelve months.

•  At present nonfarm payroll employment is roughly 5.6 million or 4.0% below the pre-recession level. 
• There are 5.1 million fewer payroll jobs than the Obama Administration promised the economy would have by the end of 2010 if we passed the Obama Administration’s stimulus legislation.

 This performance is significantly weaker than the job creation record of the “Reagan Recovery” that followed the severe recession of 1981-82.  At the comparable point in time during that recovery:

•  Payroll employment was 6.2 million jobs (6.8%) higher than the pre-recession level.
• If this recovery had duplicated the path of the recovery from the 1981-82 recession, there would be 14.9 million more payroll jobs than we have today.

 Even when viewed from the end of the respective recessions, this job recovery is weak.  Thirty-one months after the recession ended in June 2009, payroll employment has increased by 1.5%.  Thirty-one months after the end of the 1981-82 recession, payroll employment had increased by 9.8%.

Unemployment Rate

The unemployment rate declined to 8.3% in January from 8.5% in December.  However, much of the recent decline in the unemployment rate can be attributed to a decline in labor force participation.  Labor force participation dropped to 63.7% in January.  This is the lowest labor force participation rate in nearly three decades.  Labor force participation stood at 66.0% at the beginning of the recent recession.  If the participation rate had remained at the pre-recession level, the unemployment rate would be approximately 11.4%.

While today’s report is encouraging in some aspects (raw payroll jobs numbers and unemployment rate), the data continue to point to a subpar recovery.   Complicating an analysis of this month’s data is the fact that today’s release incorporated the annual benchmark revision to the employment survey (payroll jobs) and updated population data from the 2010 census (household survey).