Euquant

Economists predicted that the unemployment rate would increase to 10.1% and the economy would gain 15,000 jobs. The real figures show that the unemployment rate decreased to 9.7% (an unexpected positive change) but the number of jobs declined by -20,000 (an unexpected negative change).
There is still a mixed employment picture but overall the positive changes are beginning to slightly outweigh the negative changes and it appears that employment has clearly bottomed out and is beginning to move in a positive direction; albeit very slowly.
The most encouraging signs are that the loss in jobs was still relatively small (-20,000), the unemployment rate edged downward (-9.7%), there were 430,000 fewer unemployed workers, and the labor force increased by +111,000. Also, the number of [underemployed] people (i.e. people who worked part-time but wanted to work full-time) decreased by -849,000. The biggest negative change was that the number of workers who have become discouraged and have dropped out of the labor market has continued to increase +136,000. In general however the employment report reflects positive changes.
Specific figures:

The unemployment rate decreased from 10.0 percent to 9.7 percent.

The number of job losses declined from -150,000 in December to -20,000 in January.

The size of the labor force increased in January by +111,000 workers. In December the labor force had decreased by -661,000 workers.

The number of persons underemployed (i.e. employed part time but would like to have full-time work) decreased by -849,000, which brought the number to 8.316 million.

The number of discouraged workers (i.e. workers who have given up looking for jobs and dropped out of the labor force) increased by 136,000.

The industries experiencing the greatest gains in employment were as follows:
     Temporary Help Services     52,000
     Retail trade               41,100
     Motor Vehicles and Parts     22,700
The industries experiencing the greatest losses in employment were as follows:
     Construction               -75,000
     Manufacturing (goods0     -60,000
     Transport & Warehousing     -19,000

A Perspective on the Economy Prepared for CNN by Thomas “Danny” Boston (CEO of EuQuant)

Everyone is focused on small businesses these days and why the economy is not generating more jobs. So I wanted to explore this topic in more detail.

Small businesses (those with fewer than 500 employees) now account for over three quarters of all jobs in the economy. Small business job creation is very important, especially in a sluggish economy. During the worst quarter of the last recession (the first quarter 2009) all of the net gain in employment was generated by businesses with 50 or fewer employees.

It is imported to institute policies to support small businesses if we want to achieve employment growth. But not all small businesses are net job creators; only certain small businesses are. Therefore, giving an employment tax credit to all small businesses may not be the most efficient way to proceed. Most of the benefits may be lost because they will be distributed to firms that lose as many jobs as they create.

Given the growing scarcity of fiscal resources we have available, the administration should certainly assist small businesses if it wishes to have more employment growth. But it needs to do this in a more targeted fashion. Simply instituting a general employment tax credit for all small businesses is not necessarily targeted. Instead, the Administration needs to focus on policies that will benefit those small firms that are net creators of jobs, i.e. the high-growth small firms that generally have 50 or fewer employees. One way to do this is through an investment tax credit or accelerated depreciation allowance for high employment growth firms.

1.      If the credit is given to high-growth firms, it will most likely go to firms that would have created jobs anyway.
2.      If the credit is given to low growth firms, it will most likely go to firms that will lose as many jobs as they create.
3.      At the end of the day, the government will probably have spent over $30 billion worth almost no noticeable net effect on job generation.

It is important to focus on bank lending, but the primary problem confronting small businesses is the absence of demand and sales, not a lack of access to credit (based on the results of a recent survey conducted by NFIB, Small Business Economic Trends). Some Data in support of this position: (Note: All results are derived from the Bureau of Labor Statistics, Business Employment Dynamics)
•     Small businesses (those with 500 or fewer employees) now account for over three quarters of all new jobs in the economy, 77%.
•     During the depth of the recent recession (the first quarter 2009) small businesses created 82% of all jobs in the economy.
•     During the depth of the recession all of the net new jobs were created by small businesses with 50 or fewer employees.
•     During the last recession, the share of all new jobs created by small businesses increased significantly while the share new jobs created by large businesses decreased. At the same time, the share of jobs that were lost in small businesses and large businesses did not change.
•     Since 1992, small businesses (those with less than 500 employees) have accounted for 77 percent of all jobs created. Large businesses have accounted for 23 percent of all new jobs.
•     During the same period, small businesses account for 78 percent of job losses and large businesses accounted for 22 percent of job losses.
•     During the first quarter of 2009, the economy experienced the largest monthly loss in jobs (i.e. an average of 691,000 jobs per month). During this quarter the share of new jobs created in small businesses was 82 percent while the share of all jobs lost in small businesses remained almost constant at 77 percent. The share of jobs created in large firms declined from 23 percent to 18 percent, while the share of jobs lost in large firms increased slightly from 22 percent to 23 percent.

We should stop looking for a quick fix, because history has taught us that recovering from severe recessions takes time. For example, it took almost 15 years to fully recover from the Great Depression and many years to recover from the recession of 1981/82.
A great deal of the wealth of households and capital of small business owners is tied up in their real estate. Until the real estate market recovers fully, the spending of households and business owners will continue to be abnormally low.
Because the banking sector has not open credit lines sufficiently, businesses and households have a very high "precautionary demand for money". This means that they are simply hoarding money in case they encounter bad times. They have very little confidence that if they expand their business operation or run into problems they can rely on credit from the bank. Therefore, they have greatly reduced their costs (and payrolls) to preserve working capital. At the same time, households have accelerated their rate of savings. Under these circumstances, very little vigorous growth can occur.