Unemployment Dips, But What’s Next?

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The unemployment rate dropped to 9.7% in January from 10% a month earlier. That 0.3 percentage point drop is significant and could be a sign that the economy is improving. But as our sister site TheStreet.com reports, “the jobless rate, which now stands at a five-month low, is deceiving. The economy shed 20,000 jobs as the goods-producing and construction industries were hardest hit, losing 60,000 and 75,000 jobs, respectively. An increasing number of people gave up looking for full-time work, lowering the country's base workforce.”

Just have a look at the latest installment of MainStreet.com’s Happiness Index and you’ll see that plenty of states are still struggling with double-digit unemployment. Michigan tops 14%. (The Happiness Index looks at unemployment, non-mortgage debt and foreclosure rates in each state).

So, will the unemployment rate continue to drop? It’s hard to say, but The New York Times’ Economix blog makes an important observation: “Don’t assume that the unemployment rate is finished rising, just because it fell last month. For it to fall over an extended period, job growth needs to keep up with population growth, which translates to something like 150,000 new jobs a month.”

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