It seems that the mystery behind the dramatic decline in the unemployment rate over the last couple of months has been solved (I wonder if the BLS laughs at this sort of stuff).

From the Lisa Benson archive at the Washington Post Writers Group

Since no historical data was provided it’s impossible to get the proper context, but, this new Gallup survey indicates that one of the major reasons hiring has been slow in this economic recovery is that small businesses are adding fewer workers than they really need.

You would think that, in any economic environment, there will always be some companies that hire less workers than they need – cautious to expand given the costs associated with additional employees – but 42 percent does seem quite high.

As for the reasons behind this, uncertainty about future revenue and cash flow top the list while the inability to find qualified workers is third and healthcare costs are a distant fourth.

Apparently I wasn’t the only one confused by yesterday’s labor market report as the local paper here carried this AP story that just can’t be right, even after cherry-picking the most confusing data from a bewildering Labor Department report that was rife with revisions, seasonal adjustment anomalies, and weather factors.

The unemployment rate is suddenly sinking at the fastest pace in a half-century, falling to 9 percent from 9.8 percent in just two months — the most encouraging sign for the job market since the recession ended.

More than half a million people found work in January. A government survey found weak hiring by big companies. But more people appear to be working for themselves or finding jobs at small businesses.

The steepest two-month decline in unemployment since the Eisenhower administration is the latest sign that the economic recovery is picking up speed.

In this item at the Wall Street Journal Real Time Economics Blog, they seem to have run down all the troubles in this report along with their causes and, it seems clear that the message conveyed in the AP story above is “stretching the truth” at best.

If one were to believe the AP story, with the weather as bad as it was, just think how many people would have found work if we hadn’t gotten any snow – one million, two million?

In the monthly labor report discussed here earlier today, the Labor Department included the annual benchmark revisions to nonfarm payrolls for the last five years that resulted in downward revisions totaling 483,000 as shown below.

There were net increases of from 14,000 to 23,000 from 2006 to 2008, but 2009 payrolls were revised lower by 323,000 and, in 2010, the latest data show 215,000 fewer jobs.

In this item at the WSJ Economics blog, Paul Ashworth of Capital Economics noted, “Before the revisions, the estimates suggested that over the past year 1.1 million of the 8.3 million jobs lost during the recession had returned. Now it appears that only 950,000 of the 8.7 million jobs lost have been recovered”