Jobless Rate Rises; U.S. Shed Jobs


Wall Street Journal

LUCA DI LEO and JEFF BATER

[Economy] Associated PressApplicants talked to job recruiters at a fair in Santa Clara, Calif., on Jan. 23.

The U.S. unemployment rate unexpectedly declined in January, but the economy continued to shed jobs and revisions painted a bleaker picture for 2009, casting doubt over the labor market’s strength.

The unemployment rate, calculated using a household survey, fell to 9.7% last month from an unrevised 10% in December, the Labor Department said Friday. Economists surveyed by Dow Jones Newswires had forecast the jobless rate would edge higher to 10.1%.

Meantime, nonfarm payrolls fell by 20,000 compared with a revised 150,000 drop decline in December. Economists had expected payrolls to be flat. The December figure was revised down sharply from an originally reported 85,000 drop.

The Labor Department’s annual benchmark revision to the survey that produces the monthly payroll report painted a bleaker 2009 picture. Last year, job losses were almost 600,000 more than previously reported, the revisions showed.

The January report was influenced by several special factors that may not be consistent with the underlying jobs trend. Temporary hiring for the U.S. 2010 census collection helped the employment picture in January, while the unusually cold weather probably hurt it. The interaction of a very bad employment year in 2009 with January seasonal factors clouds the picture further, analysts warned ahead of the release.

“We will be inclined to treat either a very strong or a very weak employment report — particularly the payroll portion — with a greater than usual skepticism,” Goldman Sachs economist Andrew Tilton warned in a note.

The so-called “underemployment” rate–which includes everyone in the official rate plus those who are neither working nor looking for work, but say they want a job and have looked for work recently–fell to 16.5% in January from 17.3%.

Since the start of the recession at the end of 2007, payroll employment has fallen by 8.4 million. Over the last quarter, however, employment has shown little net change as the economy’s recovery helped companies retain workers.

Although the revisions show there were more job losses in 2009 than previously reported, the moderation in payroll cuts in the second half of last year remained broadly in place. November was revised to show a 64,000 gain in payrolls from a previous reading that only 4,000 jobs were added.

Last month, employment fell in construction, transportation and warehousing, while retail trade and temporary help services added jobs. Temporary services added 52,000 jobs in January.

The Federal Reserve’s view that U.S. interest rates must remain at a record low for several months shouldn’t change following the jobs report. Fed officials have in the past warned against reading too much from just one set of monthly data.

The central bank’s rate-setting committee left interest rates close to zero last week in the face of low inflation and high unemployment. The labor market’s performance is likely to be the main driver of Fed decisions this year over if and when it is time to raise interest rates.

Fed officials have predicted the unemployment rate will remain above 9% in the fourth quarter of 2010 due to a slow recovery. The economy surged in the fourth quarter of last year, but that was driven by inventories, a factor that will fade this year.

Friday’s jobs report showed that average hourly earnings rose to $18.89 in Janaury from $18.84 the previous month. The average workweek was up by 0.1 hour to 33.3 hours.

This data was also revised by the Labor department, which started to report hours and earnings for all employees, instead of just for production and non-supervisory workers.

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