US provides mixed report on state of jobs market
Disappointing number of new positions created but unemployment rate falls
THE US government offered mixed signals about the state of the American jobs market yesterday, with the unemployment rate falling to 9pc in January, even though the number of jobs created was below expectations.
The White House welcomed the 0.4 percentage point drop, adding that 1.1 million jobs had been added in 2010, the strongest private sector growth since 2006. Yet this is far short of the 8.6 million jobs that have been lost since the start of the recession.
Austan Goolsbee, chairman of President Barack Obama's Council of Economic Advisers, noted that unemployment remained unacceptably high.
Snowstorms across the US acted as a brake on hiring last month and kept many hourly paid workers at home. This largely explained the weakness in the non-farm payroll data, which recorded only 36,000 new jobs in January.
There were some signs of strength, however. Manufacturing employment grew by 49,000, the largest increase since August 1998.
Despite the conflicting signals in the Labour Department's report yesterday, economists agreed a recovery in the labour market was proceeding apace. Many investors also saw the data as a sign of strength. Government bonds were sold off and the dollar rallied against the yen and the euro.
The payroll gain reported by US employers was a quarter of the 145,000 gain economists had expected. But a separate household survey showed nearly 600,000 more people reported they were employed.
The employment rate has dropped 0.8 percentage point since November, the biggest two-month decline since 1958.
"Looking at the two surveys together, they suggest that employment is going to pick up. Clearly it has lagged the other measures of activity, but we're in a jobs market recovery now," said Zach Pandl, US economist at Nomura Securities International in New York.
Economists estimate the blizzard reduced payrolls by between 50,000 and 75,000.
The government also revised November and December payrolls to show 40,000 more jobs created than previously estimated.
Data on manufacturing and retail sales has suggested the economy's strong momentum continued into the new year.
Economists said January's employment report, excluding the weather effect, was consistent with the economy growing above 3pc. The labour market has lagged behind the broader economy, which grew at a 3.2pc annual rate in the fourth quarter.
"We see significant potential strength in this report and will be looking to see whether the drop in the unemployment rate persists," said Michael Gapen, an economist at Barclays Capital in New York.
"If it does, then it will be a further signal that underlying job growth is stronger than reported."
Last month's drop in the unemployment rate was encouraging because it reflected more people finding work.
In recent months, a large portion of the decline in the jobless rate reflected people giving up the search for work, meaning they were no longer counted among the ranks of the unemployed.
Still, the decline is unlikely to discourage the Federal Reserve from completing its $600bn (€442bn) government bond-buying program to support the economy.