Burst of jobs helps lower unemployment rate

By Don Lee

Feb. 3, 2012 12 AM PT

Reporting from Washington —

An unexpected burst of job growth last month helped drive down the nation’s unemployment rate to its lowest level in three years, sparking a rally on Wall Street and raising hopes that the long-sluggish labor market is rapidly gaining momentum.

Employers in the U.S. added 243,000 net new jobs in January -- about 100,000 more than what analysts were forecasting and the most in nine months. Job gains were broad-based, powered by robust increases in manufacturing and solid additions in professional and business services, such as accounting and engineering, and in the leisure and healthcare industries.

The nation’s unemployment rate fell in January for the fifth straight month to 8.3%, down from 8.5% in December, the Labor Department reported. In August, the jobless figure was 9.1%.

Some economists called the latest employment report a game-changer that signaled better times ahead for American workers.

“This is a great surprise,” said Heidi Shierholz, an economist at the Economic Policy Institute. “It was out of context with other things we’ve been seeing” in the economy, “so we can’t be confident that this is the new state of things.”

Many others were cautious in their assessment, noting that job growth was inflated by the unseasonably warm weather -- construction reported sizable gains, for instance -- and that the outlook remains constrained by government budget cuts, financially strapped consumers and a slowing global economy. Federal Reserve Chairman Ben S. Bernanke described the recovery as “frustratingly slow” at a congressional hearing Thursday.

Still many analysts and investors cheered the report. Stocks surged Friday, with the Dow Jones industrial average ending at its highest point since 2008.

Perhaps nowhere was the news as welcome as in the White House. Labor Secretary Hilda L. Solis heralded the report, saying the January data were not a one-month aberration and that the trend had been building for some time.

Like others in the Obama administration, Solis used the occasion to make a case for extending payroll tax cuts and emergency jobless benefits beyond their slated expiration at the end of this month.

There were 12.8 million unemployed workers in January, 43% of them jobless for more than six months -- an unusually high percentage that raises serious questions about their future ability to become employed, as skills tend to erode over time.

Analysts say the economy needs to create at least 100,000 net new jobs a month to keep pace with the growth in the workforce population. But even double that number isn’t that much when considering that the nation lost on average about 360,000 jobs a month during the recession in 2008 and 2009.

Officially, the economy has been in recovery since June 2009, but it wasn’t until March 2010 that the nation began adding jobs. With January’s increase, the number of people on U.S. payrolls stands at about 5.6 million below what it was at the start of 2008.

Patrick O’Keefe, economic research director at J.H. Cohn, an accounting and advisory firm, said office jobs such as accounting and bookkeeping are growing because companies are doing well and they need business services.

But he said that’s not the case with consumers, many of whom remain heavily indebted and have seen their incomes and wealth hurt by weak pay increases and the depressed housing market.

Businesses won’t aggressively beef up hiring unless they’re confident they’ll see stronger demand, O’Keefe said. And even then, he added, many companies don’t have to hire as many people because they can use temporary workers or add hours for the 8.2 million part-time employees who want full-time hours.

“Employers have a need for labor, but they’re tentative in their long-term commitment,” he said. “They want a date but don’t want to get married.”

He said, however, that there was no denying that January produced a strong jobs report.

Manufacturing, a generally high-paying industry, added a hefty 50,000 jobs last month, after increasing payrolls by 32,000 in the previous month. Car factories and makers of machinery, fabricated metals and wood products all bulked up.

The robust hiring at factories reflects the revival in U.S. auto manufacturing, which has become more competitive and has benefited more recently from an increase in car sales.

Even so, manufacturing isn’t expected to maintain hiring at anything like last month’s pace. For all of 2011, manufacturing added about 20,000 jobs a month, on average.

The nation’s service sector has been slower to rev up, but last month marked some notable gains. Professional and technical businesses -- a big category that includes accountants, lawyers, computer engineers and consultants -- added more than 30,000 positions. And with that, this category of nearly 8 million workers has recovered all the jobs lost during the recession.

Hotels and restaurants, which employ 11.6 million people, also returned to their pre-recession high in employment last month as they increased their headcounts by 29,000. But it’s unclear whether such growth can be sustained.

Analysts said the warm weather likely boosted staffing in January, as it did for the construction industry, where payrolls were up 21,000 last month on top of 31,000 in December -- the biggest back-to-back increase for construction since 2007.

Among other services, healthcare employment continued to expand, adding 31,000 in January. Except for one month in 2003, the healthcare sector has increased jobs in every month over the last decade. The temporary-help industry also grew last month.

The information services industry, however, lost 13,000 jobs, mostly at motion-picture and sound-recording firms. Banks and other financial services also shed a small number of positions. And government continued to reduce staffing, though with overall cuts of 14,000, it was less than previous months.

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