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January Jobs Report: Solid Growth, but It Needs to Continue

For the first time in several years, we have an unambiguously positive employment report. The U.S. economy added 243,000 payroll jobs in January 2012 and the unemployment rate fell to 8.3 percent. One month does not a trend make, but the past several months of data show a labor market that is recovering, and an economy that has been accelerating even as fears of a double-dip recession rose. The main complaint about the report, which isn't really a complaint, is that we need several more months like this to recover all the ground lost in 2008 and 2009.

For those of us who believe the U.S. economy is performing better, stronger and faster than its peers in the developed world, and than many pessimists expect, this is something of a vindication.

Let's look inside the data.

Positive payroll number. The economy created 243,000 jobs. There was no great post-Christmas season let-down in hiring, as many analysts expected. Strength was across the board. Manufacturing added 50,000 positions. Health care and education added decent chunks of jobs, per usual, but professional services added 70,000 and retail added 10,000 jobs. Average weekly earnings rose a bit, and were up 2.5 percent from January 2011.

The conservative recovery continues. Once again, as has been the case for much of the past two years, employment growth is coming about in spite of government spending, not because of it. As states, cities and the federal government have embraced austerity, employment in the public sector has been falling. As the accompanying chart shows, pretty much every month, the private sector adds jobs while the public sector subtracts payroll positions. Between May 2010 and January 2012, the public sector cut 1.024 million jobs while the private sector added 2.245 million. The trend continued in January, with the private sector adding 257,000 and government cutting 14,000 jobs.

The trend remains the friend. Each month, the Bureau of Labor Statistics revisits the data from the previous two months and revises it. Every January, it looks back over its statistics and revises previously reported statistics. This month, the data were generally revised upwards. November's jobs number, originally reported as a gain of 120,000 in December and revised to 100,000 in January, was revised to 157,000. December's gain, originally reported as 200,000, was revised to 203,000. That's an additional 60,000 jobs. And the so-called benchmark revision resulted in a revision of the December 2011 employment figure upward by 266,000.

Add it all up, and there are now 132.4 million people with payroll jobs in the U.S., the highest number since February 2009.

Household Survey Improves. BLS compiles employment data through two surveys. The establishment survey, in which it calls companies and asks how many people they employ, provides the payroll jobs figure. The household survey, in which it calls people at home and asks them questions about their work status, yields the unemployment rate. But it also provides a host of other data, like the labor force participation rate and alternate measures of labor market underutilization — which have remained generally depressing even as the payroll figures have improved. Well, this month, the household survey produced some optimistic data. The unemployment rate fell to 8.3 percent. The size of the labor force grew, but so did the number of people who said they were working. In December, according to the household survey, some 140.79 million Americans were employed. In January, the same survey found 141.64 million Americans were employed. That's a gain of 850,000 in one month.

For more on the January jobs report, watch Aaron Task's interview with Chris Rupkey, the chief financial economist at Bank of Tokyo, in the attached clip.

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.