According to the latest release on the subject from the Commerce Department, fourth quarter 2010 Gross Domestic Product (GDP) growth clocked in at 3.2%, following a third quarter that saw an increase of 2.6% in the GDP. All in all, that is a pretty respectable level of economic growth. The jobs picture is the classic good news/bad news scenario. The unemployment rate fell to 9.0% in January but the economy only generated a net 36,000 jobs. What is interesting about these numbers is that the number of unemployed persons fell, the labor force participation rate increased slightly and the number of long term unemployed fell, too. My question is this: where did all those unemployed people go? The obvious answer is that they either entered the ranks of discouraged workers who had stopped looking for jobs or they had entered the ranks of the self-employed.

According to the monthly Small Business Optimism Index, calculated by the National Federation of Independent Business (NFIB), small business owners are feeling a little bit better — but only a little bit. The NFIB numbers show that small business sales have improved slightly but not enough to enable small business owners to be creating any jobs. On the other hand, retail sales have improved. The Commerce Department announced last week that retail sales in January rose by 0.3% over December levels. The Conference Board’s Consumer Confidence Index also increased in January, climbing 7.3 points from 53.3 in December to its current level of 60.6. It is very interesting that consumers are feeling better and the unemployment rate has declined, in spite of the fact that nobody seems to want to admit that they are creating jobs. It will be even more interesting to look back at nonemployer business formation during the 2010-2011 period and see whether that data helps to connect the dots.