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The Labor Department's monthly report on the employment situation showed that employers shed 20,000 jobs in January and the unemployment rate dropped from 10.0 percent to 9.7 percent.  The Labor Department said that employment was "essentially unchanged" and that has been the case for the last three months.  However, the total of jobs lost since the recession began in December 2007 increased to 8.4 million.

Jobs losses were seen in the construction and transportation and warehousing sectors  The construction sector saw 75,000, bringing its total loss since the recession began to 1.9 million.  Transportation and warehouse workers saw their ranks shrink by 19,000, with messengers and couriers losing 23,000 jobs.  That sector has lost 223,000 jobs since January of 2009.

On the positive side, employers hired more people in the temporary help, manufacturing, retail trade, and health care sectors.  There were 52,000 more employees in the temporary help sector in January.  Manufacturers added employees for the first time in nearly three years, with 11,000 more people getting paychecks in that sector.  Retailers added 42,000 employees, after showing little change in the previous two months.  And the health care sector, which is one of the few to have added employees since the recession began, added 14,500 employees.  Employment of health sector workers has increased by 218,000 since January 2009.

The report shows that the economy is very close to adding jobs instead of shedding them.  It's like a drunk teetering on his bar stool after slamming down a line of shots.  The shots in the case of the economy are the stimulus package and easy money, and just like a drunk who's had one too many, it's about ready to topple over and jobs will stop being shed.

Analysts had expected the payrolls figure to come in with a gain of 15,000, with estimates ranging from a decrease of 100,000 to a gain of 100,000.  The unemployment rate was projected to remain at 10.0 percent, with projections ranging from 9.8 to 10.3 percent.

The chief economist at Credit Suisse in New York said that "the labor market...is beginning to find its bottom.  We're still teetering on the cusp of job growth."  A research director at GFT Forex in New York concurred, saying there was " a slow improvement in the labor market...but it wasn't quite good enough to push us into positive territory just yet."

But the economy is not out of the woods yet, an economist at Deutsche Bank in New York warned.  "The economy is moving slowly and it takes time for companies to turn around from where they were to where they are going," he said.

That process will not be helped by irresponsible, grandstanding politicians who don't have a clue about economics like Michael Steele.  Steele, in response to the jobs report, slammed the Obama administration's stimulus package, saying that approximately two million jobs were lost since the stimulus began and claiming that the stimulus isn't working.  This is, of course, ridiculous.  Virtually all credible economists say that the stimulus has helped the economy grow.

Furthermore, Steele, in his haste to score political points, ignores the fact that while two million jobs have been lost since the stimulus was enacted, the total number of jobs lost since the recession began is 8.4 million.  That means that 6.4 million jobs were lost in the approximately 14 months before the stimulus was implemented.  The job loss rate before the stimulus was enacted was approximately 457,000 per month.  After the stimulus, the loss rate was approximately 200,000.

But those numbers don't help irresponsible politicians like Michael Steele.  His irresponsible and inaccurate comments do not help the economy grow and he and the rest of the grandstanding politicians -- on both sides of the aisle -- would be well served to shut up.

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The statistics released by the Labor Department today painted a mixed picture of the economy.  The good news came in the productivity numbers, which increased by 6,2 percent in the fourth quarter of 2009.  Output increased by 7.2 percent while hours worked only increased by 1.0 percent.  Over the course of the year, productivity increased by 5.1 percent, which was the biggest gain since 2001-2002.

Analysts warned that these types of gains may not be sustainable, as employers were able to keep from adding to their payrolls even though sales stabilized.  As the chief economist from Deutsche Bank Securities in New York said, "the productivity gains of 2009 are unsustainable."  The gains can be attributed to "rising output amid ongoing labor cuts" and as employers begin to hire people as growth picks up, they are unlikely to continue.

The release of the weekly initial unemployment claims data from the Labor Department was the bad news part of the equation.  Initial claims increased by 8,000 from last week's revised figure of 472,000, coming in at 480,000.  The four week moving average increased to 468,750, an increase of 11,750 from last week's revised 457,000.

Continuing claims increased by 2,000 to 4.602 million.  The four week moving average for continuing claims was 4.618 million, a drop of 51,250 from last week's revised figure.

There were 31 states reporting a drop of more than 1,000 claims, with California's decrease of 22,674 leading this group.  On the down side, Puerto Rico and Oregon had more than 1,000 more claims than the prior week.  Puerto Rico saw an increase of 2,439 claims and Oregon's claims increased by 4,336.

Both the productivity figures and initial claims came in below the consensus estimate.  Productivity was expected to increase by 6.5 percent, with estimates ranging from 4.3 percent to 8.5 percent.  And initial claims were projected to come in at 455,000, with projections ranging from 440,000 to 475,000.

Many expect the trend of a slow and steady recovery to continue.  The CEO of Eaton Corp said "the economy has continued to move along the slow recovery path that we thought it would."

This is a trend that investors need to keep track of.  When will the economy pick up steam?  We'll get another indicator of whether this is happening tomorrow, when the government releases its monthly payrolls data.

The January survey of employers by Automatic Data Processing showed that private sector employers shed 22,000 jobs in January.  December's job losses were also revised down, from 84,000 to 61,000, an improvement of 23,000 for the month.  The January job losses were the lowest since February 2008, which is when ADP's survey first showed that recessionary pressures were causing employers to lay off workers.

In the report, ADP said that employment in the services sector increased by 38,000.  This was the second month in a row where employment in that sector rose.  However, that increase was offset by a decline of 60,000 in the good producing sector.  Manufacturing shed the most jobs, with 25,000 jobs lost.

Large and small employers continued to cut their payrolls, with employers of 500 or more laying off 19,000.  Small businesses, defined as those with less than 50 workers, cut 12,000 jobs.  However, medium sized businesses, with 51-499 workers, added 9,000 workers.  This was the first gain in employment among these businesses since January 2008.

The ADP report is seen by many as a precursor to the government's payroll figures, which will be released on Friday.  It tends to be more negative than the government's report, totaling 500,000 more job losses than the Labor Department in the six months ending December 2009.

The consensus estimate was for a loss of 30,000 jobs, with estimates ranging from a gain of 50,000 jobs to a loss of 110,000.  Thus, the actual data came in better than the consensus, around the midpoint of estimates.

Analysts said the ADP number showed that the labor market is headed in the right direction.  An economist at Ameriprise Financial in Detroit said the data shows "trends are heading in a positive direction for the labor market."  He added that companies are starting to hire again as they start to believe "the economy does have legs."

While it's often said that jobs are a lagging indicator and we have often said that listening to those who say "this time is different" is a good way to lose money, that may very well be the case this time.  Consumer spending is two thirds of the economy and until the consumer feels secure about the employment picture, it's likely to remain tepid.

There cannot be a strong recovery without the jobs picture improving.  And that's why Friday's report from the Labor Department is so important.  Investors may want to protect their gains ahead of that report by either taking profits or using trailing stops to protect gains.

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