U.S. Economy: Jobless Rate Declines, Payrolls SlowShobhana Chandra
The U.S. jobless rate unexpectedly fell in January to the lowest level in 21 months, while payroll growth was depressed by winter storms.
Unemployment declined to 9 percent from December’s 9.4 percent, the Labor Department said today in Washington. Employers added 36,000 workers, short of the 146,000 median gain projected by economists in a Bloomberg News survey.
The dollar gained and Treasuries slid as the drop in unemployment pointed to a labor market that’s on the mend following the loss of almost 9 million jobs during the recession. The improvement may not be enough to satisfy Federal Reserve Chairman Ben S. Bernanke, who’s likely to keep interest rates near zero for another year, said Bill Gross, co-chief investment officer of Pacific Investment Management Co.
“We’ve got at least 12 months ahead of us before the Fed feels comfortable in terms of a sustained period of job creation,” Gross, who manages the world’s biggest bond fund, said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “I would suspect that the Fed would believe that a more normal unemployment rate would certainly be something less than 8 percent.”
The yield on the 10-year Treasury note climbed to 3.64 percent at 4:20 p.m. in New York from 3.55 percent late yesterday. The dollar strengthened to $1.3587 per euro from $1.3634. The Standard & Poor’s 500 Index rose 0.3 percent to 1,310.87 at the 4 p.m. close.
Payrolls in construction and transportation, industries most affected by bad weather, declined in January, while factory employment rose the most since August 1998.
“Snow suppressed payrolls, but look past it and the labor market is clearly improving,” said Ward McCarthy, chief financial economist at Jefferies & Co. in New York.
Companies including Emerson Electric Co. are hiring as consumer spending, business investment and exports climb, signaling the expansion is gaining momentum.
Emerson, the maker of data-center equipment and thermostats, plans to boost global employment this year by about 7,000 workers to meet rising sales.
“We are planning a very strong 2011,” Chief Executive Officer David Farr said on a Feb. 1 conference call with investors. “There’s definitely a point in time that we’re going to have to start bringing people in.”
Private hiring, which excludes government agencies, rose 50,000 in January. Factory payrolls increased by 49,000, exceeding the survey forecast of a 10,000 gain.
President Barack Obama is stressing job-creating public investments in education, technology and infrastructure as he prepares to send a budget to Congress. He’s being hemmed by a budget deficit that’s forecast to widen to a record $1.5 trillion.
“We’ve got to do more to keep getting the unemployment rate down and to keep getting people back to work,” White House chief economist Austan Goolsbee said in an interview on Bloomberg Television.
The jobless rate, which was projected to rise to 9.5 percent, declined as the number of unemployed fell by 590,000. Those people who said they were not in the labor force increased by 162,000 in January, according to the Labor Department’s survey of households. The drop from November’s 9.8 percent marked the biggest two-month decline since 1958.
December’s gain in payrolls was revised to 121,000 from a 103,000 increase reported earlier, while November’s rise was revised to 93,000 from 71,000.
Average hourly earnings increased to $22.86 from $22.78 in the prior month. The average work week for all workers slipped to 34.2 hours from 34.3 hours.
Employment at service providers rose 18,000. Construction payrolls dropped 32,000 and transportation and warehousing jobs fell by 38,000. Retailers added 27,500 jobs.
A storm that spread from the Midwest and the South to New England during the week covered by the Labor Department’s employer survey likely depressed January numbers as businesses temporarily closed.
Bad weather prevented 886,000 Americans from going to work in the January survey week, the Labor Department’s survey of households showed. That compares with an average of 282,000 over the previous five Januarys. Economists at Morgan Stanley said the storms may have subtracted about 150,000 workers from the payrolls count, they said in a note to clients.
Government payrolls decreased by 14,000. State and local governments struggling to close budget deficits reduced employment by 12,000, while the federal government trimmed 2,000 workers.
The so-called underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 16.1 percent from 16.7 percent. The number of people unemployed for 27 weeks or more decreased as a percentage of all jobless, to 43.8 percent from 44.3 percent.
Revised figures showed the economy lost 8.75 million jobs as a result of the recession. For all of 2010, the U.S. added about 909,000 jobs. Economists surveyed by Bloomberg in January projected unemployment will average more than 9 percent this year.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Fed Chairman Ben S. Bernanke said yesterday in a speech at the National Press Club in Washington. “It will be several years before the unemployment rate has returned to a more normal level.”
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