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Nice Improvement But Not Really A Game Changer

January's employment situation figures from the Bureau of Labor Statistics (BLS) represent a nice improvement. The addition of 243,000 new jobs is definitely welcome. Apparently, this is particularly true in the stock market, where the DJIA, S&P 500, and NASDAQ are all up more than 1% a little after 11am.

While the job gains are welcome, they reinforce the idea that the economy continues to hum along on a slow-growth pace. January's 243k jobs figure comes after the economy added 203k in December and 157k in November, so it seems that the pace of hiring is moving in the right direction. (All jobs figures from BLS.)

But I want to temper enthusiasm a bit. Remember, in three of the first four months of last year, the economy added more than 200k jobs: February, 220k; March, 246k; April, 251k. At that point, too, it appeared that the job market was moving in the right direction, with the pace of hiring accelerating. What happened in May? The pace of job growth eased, and the economy added fewer than 100k jobs in each month over the summer. Even in 2010, we saw three months of job growth in excess of 200k, and one of those was over 500k.

Clearly, there are reasons for these changing dynamics. Yet, some things remain. Many aspects of the domestic economy continue to show mild growth. Industrial production, for instance, advanced 0.4% in December, after dropping 0.3% in November, which followed a 0.6% gain in October and 0.2% improvements in both August and September. Are we seeing massive improvements that suggest hiring is really going to take off? Not really. Just more the same.

At the same time, overseas risks seem to be growing. The IMF recently cut its growth forecasts. Let's face it, Europe, particularly southern Europe, doesn't look so hot, and that threatens much of the continent later this year. The UK is also suffering: Brad DeLong recently wrote about how the UK is doing worse now than during the Great Depression, and, as he writes, "the odds are high that British real GDP is headed down again."

While I remain somewhat optimistic on the US economy moving along its current slow-growth path (good gravy, think about how conditions must be if I am using "optimistic" with "slow-growth"), we are unfortunately not in a vacuum. Weakening conditions externally can weigh on economic activity here, and that could hamper job growth later this year.