This is a rush transcript from "On the Record," February 5, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Well (INAUDIBLE) and we have the latest unemployment numbers. It sounds like pretty good news to us. The unemployment rate for January is at 9.7. That's down from December's 10 percent. But Steve Moore says don't polish your briefcase just yet. Jobs are not back. Steve Moore joins us live. He's co-author of the new book, "Return to Prosperity."

Steve, I saw that 9.7 today and I thought, OK, great, we're -- you know, maybe that's the beginning of a trend. But then I dug a little deeper, read what you said, and it's not. We shouldn't be cheering, at least not yet.

STEPHEN MOORE, WALL STREET JOURNAL, "RETURN TO PROSPERITY" CO- AUTHOR: Well, Greta, first of all, it -- there is that kind of psychological plateau that now we're below 10 percent unemployment, and I think that is important. And the fact that we did see a dip in the unemployment rate is a good number. So I'm happy about that, although 9.7 percent is still a very high rate.

The underlying numbers, though, are a little less cheerful than that. If you look at some of the things that the Labor Department told us today, one of the most important things, Greta, they said is that we actually lost about three quarters of a million more jobs last year than had been originally estimated. So that's a really bad number.

The other problem is, Greta, and maybe the biggest problem of all, is we're still not creating new jobs. There were 20,000 jobs lost in this latest Labor Department report, and we should be in a phase right now where employers are starting to hire more workers. That just isn't happening yet, and I think it speaks to the fact that maybe what Washington has been doing isn't working too well.

VAN SUSTEREN: Well, you know, when I read the 9.7 percent and I was delighted to hear the number had come down from the 10 percent in December...

MOORE: Yes.

VAN SUSTEREN: ... then I read that -- then I read that, you know, you were basically putting on the brakes. So I thought, well, maybe the 9.7 is down from the 10 because there are more people who are discouraged from looking for jobs. Of course, that would necessarily boost the -- help the 9.7 number.

So I went to the underemployment rate. Now, in December -- that -- those are the people -- those are the people who've just given up. They're in utter despair. It includes them.

MOORE: Yes.

VAN SUSTEREN: Underemployment rate in December was 17.3 percent. It actually went down to 16.5 percent in January. So that's a good sign. And aren't these numbers sort of lag indicators, sort of, I mean -- so, you know, they're sort of the last to sort of begin the engine of change. So that's sort of -- that -- I mean, so it's a little bit encouraging.

MOORE: Yes. Look, there were some encouraging numbers here, but when you're still losing job the third year into a recession, Greta, that's not a good sign. That means that we're just not doing in Washington what it takes to get these unemployed workers hired.

I'll just tell you a personal anecdote. We needed to hire a house cleaner about a month ago. We put an ad in the newspaper. Greta, we had 300 responses for one ad for one house cleaner.

VAN SUSTEREN: Yes, but...

MOORE: And I talked to small businessmen, who -- when people have job openings, they're just deluged with applications. And so I really have a theory that the unemployment rate is a lot higher than these statistics are really indicating.

VAN SUSTEREN: Well, we've had two people come to our house to repair things recently, and I answered the door for both of them, and they -- this was, like, four days apart. Both these young people came in wearing iPods, listening to music as I came to the door to let them in. One was to fix some plumbing and one was to fix some other thing (INAUDIBLE) And the -- and they both sat and listened to the iPod the whole time they were there. They couldn't even -- you know, I mean, I had a hard time, you know, telling them where to go in the house.

So it -- I mean, I thought -- you know, I thought to myself, With the job market this lousy, you know, like, take the iPod out at least while you're working!

(LAUGHTER)

VAN SUSTEREN: I mean, I'd never met them before.

MOORE: Greta, don't you understand? This is the new generation. I don't -- my kids don't even talk to me!

VAN SUSTEREN: These were not young people.

MOORE: All they do is (INAUDIBLE)

VAN SUSTEREN: These were -- these were not...

MOORE: OK...

VAN SUSTEREN: One of them was not particularly young. That was the astounding thing.

MOORE: Right.

VAN SUSTEREN: You know, this person probably was in his 40s...

MOORE: Yes.

VAN SUSTEREN: ... sitting there with an iPod in his ear. I mean, I don't know.

MOORE: But you know, the point is just that I think that we are underreporting unemployment. There are a lot of people who are just on the sidelines, aren't being picked up by this data, that just aren't looking for jobs. They feel like they're not out there.

And I just think we need a new approach, maybe some kind of tax cut for small businesses to get employers hiring again because when you have 15 million people who don't have jobs -- it may be the most depressing statistic of all is that the number of Americans who've been unemployed for 26 weeks -- we call that long-term unemployed -- that keeps rising. And what that's saying, Greta, is that when Americans lose their job, they're having a very difficult time finding a new one.

VAN SUSTEREN: Now, you mentioned small business. I couldn't help but notice that the president had a lunch this week with -- about jobs. And he had the CEOs of these giant corporations who -- people who are probably, you know, very smart men -- they were all men. They happened to be men. And probably have never -- don't even know any of the names of their employees. You know, and maybe the president's meeting with small businesspeople, but he needs to do more than just the occasional road trip. He needs to talk to small business people, the people who do the hiring, who have the great need in this country.

MOORE: There's no question about it. And one of the things the president could, I think, that would really help is let's keep in place those Bush tax cuts. You know, the -- most small businessmen do not pay taxes at the corporate level, they pay it at the personal income tax level. If you raise income tax rates on small businesses, that's less money they have to hire new workers. So that would be a simple thing to do. And I think also, we should look at ways to encourage businesses to be able to get loans and to expand their businesses.

VAN SUSTEREN: And I...

MOORE: What I talk to small business right now...

VAN SUSTEREN: I got to go.

MOORE: ... they say Washington is a negative on hiring right now.

VAN SUSTEREN: And I got to go. Steve, thank you.

Content and Programming Copyright 2010 Fox News Network, Inc. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.