Could someone explain why the unemployment rate went down?

If you understand how the unemployment rate has always been calculated, you would understand why. From December to January the number of unemployed always rises. Typically that is always about 200,000 or more job loses but this time it was only about 20,000.

If they would go with unadjusted rates, January would always show a spike in the unemployment rate even though the economy was still expanding. If the unadjusted rate was used every year, the unemployment rate would then always indicate that something was wrong when everything was normal. During February, the number of jobs should increase but the unemployment rate remains the same.

If that is not a healthy number, then the unemployment rate will rise again. If they used the unadjusted rate, the chart would be up one month and then down another creating false indicators instead of following a trend and this would tend to worry or create over exuberance with analysts and market investors constantly when the job market is doing what it normally does during an expanding economy. Therefore 20,000 job losses in January indicates that most of the job loses from temporary Christmas jobs was replaced by permanent jobs indicating a very healthy expansion.

It is a little more complex than explained above but it is all to do with seasonally adjusted job growth/decline and which industries the jobs are created/lost. Even Larry Kudlow (CNBC - Reagan Adviser) agrees the news was pretty good because deep into the numbers, there were signs of improvement.

I read the report on Yahoo News, and it says that although twenty thousand jobs were lost, there was a net increase in hires of (I think the figure was 57 thousand). The claims for unemployment do not give an indication of any hiring that was done. Nor does hiring give any indication of how many people are applying for unemployment.

Two very different criteria.

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