Reuters:

WHY DID THE JOBLESS RATE FALL SO FAR WHEN JOB GROWTH WAS MODEST?

The employment report is compiled from two different surveys. Economists tend to look at the bigger and less-volatile survey of non-farm employers. That's the survey that yielded the 36,000 increase in employment.

The jobless rate is derived from a separate survey of households.

For its establishment survey, the Labor Department polls about 140,000 businesses and government agencies. In contrast, it polls only about 60,000 households for its household survey -- one reason economists rely more heavily on the poll of employers.

The household survey showed the number of people employed rose by 589,000 after adjusting for different population counts between the two months. The number of unemployed dropped by almost exactly the same count. That explains the drop in the jobless rate.

Interpreting the household series was particularly tricky for January because the government updates its population counts to incorporate fresher data, and that means comparisons between December and January are skewed. Some economists initially thought the drop in the jobless rate reflected an exodus of workers from the labor force.

However, a special data series smoothing out differences related to the new population count showed that the size of the labor force held steady.