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Why there's no reason to panic over the jobs report

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Payrolls Growing Steadily but Job Market Stil Weak: Justin Wolfers

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Payrolls Growing Steadily but Job Market Stil Weak: Justin Wolfers

Payrolls Growing Steadily but Job Market Stil Weak: Justin Wolfers
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The January jobs report came in noisy -- 113,000 jobs were added, well below the consensus of 189,000. At the same time, the unemployment rate ticked down to 6.6% (from 6.7% in December), which was right in-line with expectations. And it didn't fall because people dropped out of the labor force, either -- the labor force participation rate actually increased 0.2% to 63% last month.

Related: Breaking news: job creation weaker-than-expected in January

December's disappointing jobs report, which many were hoping would be proven to be a fluke, was revised up by just 1,000 jobs, to an uninspiring 75,000 versus the lackluster 74,000 originally reported.

So has the job market stalled? Is the economic recovery in trouble? Does this show the Fed should put the brakes on the tapering of bond purchases? Is the sky falling?

Not so fast.

Economist and Brookings Institution Senior Fellow Justin Wolfers warns this jobs report is a "tricky one and far too easy to misread."

Related: U.S. jobs market: Hope springs eternal. Actual jobs? Not so much

Two surveys comprise the jobs report. One surveys businesses, and generated the very disappointing results, including the weak 113,000 jobs added. The flipside is the household survey, where the Bureau of Labor Statistics goes around and asks people if they have work. Wolfers says we don't emphasize this report as much "because it's noisier, but it showed an incredibly optimistic story with employment increasing by 616,00." This report is where BLS derives the unemployment rate.

Wolfers says when you weigh the two reports together it turns out to be a 'more of the same' employment report.

"We're creating somewhere between 150,000 and 200,000 a month," he tells us. "We wish we were creating more, but still, it's a pretty healthy clip ... And there's nothing in this report that would fundamentally change anyone's mind about the recovery."

Related: Harsh weather means white-out conditions for economy

Not even December? Wolfers says these monthly reports are "pretty good guesses," but the truth is we "don't actually know" what's going on with the labor market. So you have to put the reports together and look at the broader trend.

The "truth is the past three years have been an incredibly stable recovery," he says.

Related: How the Job Market is Killing Housing

Check out the video for more insight on one of the puzzling aspects of the job market: the decline in the labor force participation rate which has hovered around a 35-year low. 

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