Unemployment Rate Rises to 4.2% as Job Growth Surprises Experts
The U.S. economy lumbered forward in January, producing triple the expected number of new jobs but also sending the unemployment rate to a 16-month high of 4.2%, the Labor Department announced Friday.
Employers added 268,000 workers, a mighty increase from December’s puny total and substantially more than the experts’ consensus forecast of about 85,000. The unemployment rate rose from 4% as the number of jobless workers also rose.
Analysts generally interpreted the new numbers as a case of good news and bad. On the plus side, the figures suggest the economy’s December tumble--when hiring froze, confidence began to slump and consumer spending barely grew--probably looked worse than it was, in part because of bad weather. On the minus side, they show the economy is still weakening.
“The wind is going out of this expansion, but it’s not completely gone yet,” said Michael J. Moran, chief economist at Daiwa Securities America Inc. in New York.
Against the bleak backdrop of other recent news, the new job figures could be seen as positively rosy. In recent days, the government has reported that the economy grew at a mere 1.4% rate in the fourth quarter, its slowest pace in five years. One business group reported that consumer confidence in January took its biggest dive in a decade, while a second said manufacturing activity had hit a 10-year low.
Analysts acknowledged that the 268,000-job jump in payrolls was substantially larger than they had expected. But they cautioned that a substantial fraction was the result of weather and the quirky way in which the Labor Department adjusts for seasonal patterns.
More than half the month’s job growth stemmed from a gain of 145,000 hires in construction--the largest since mid-1978--which rebounded from setbacks caused by unusually harsh weather in November and December. Government employment also rose by 54,000, at least in part because of new hiring by the U.S. Postal Service.
Analysts said that the one area of true strength in the labor market was the nation’s service sector, which added 183,000 positions. But these gains were at least partially offset by another steep loss in manufacturing.
Manufacturing payrolls shrank for a sixth consecutive month, declining by 65,000. Since June, manufacturing has shed about 250,000 jobs as companies cut production and laid off workers to keep up with slowing consumption.
Investors found the sizable job creation nothing to cheer about, reasoning that if the economy isn’t as weak as believed, the Federal Reserve might not cut interest rates much further, and stock prices tumbled. The Nasdaq Composite Index, which measures many of the once-hot technology stocks, fell 4.4%. The price of a 10-year U.S. Treasury note fell half a percentage point, pushing up its market interest rate to 5.15%.
Labor Department officials said January’s increase in the jobless rate--0.2 percentage points--was the largest one-month jump since April 1999. But the 4.2% rate was still strikingly low by historical standards.
Unemployment hit a three-decade low of 3.9% during three months last year, reflecting the booming economy.
Department figures showed that the growth in joblessness during January was greatest among traditionally vulnerable groups. The rate for African Americans rose to 8.4% from 7.6% in December, and the rate for Latinos increased to 6% from 5.7%. But department officials called the new unemployment levels only “marginally higher.”
The department said average hourly earnings of production and nonsupervisory workers, who make up about 85% of the nation’s work force, remained unchanged in January at $14.02. The average workweek increased about 12 minutes, offsetting an equal decline in December.
Analysts said static wages were the rule across manufacturing and service sectors and signaled that the economy’s troubles had weakened workers’ ability to win better pay.
The Bush administration jumped on the new wage and jobless figures as evidence of the need for its proposed tax cut.
“President Bush’s tax cut will allow workers to keep more of their paychecks--helping workers, families and the economy,” Labor Secretary Elaine Chao said in a statement. “The president’s tax cut is the answer to stimulate the economy and head off further unemployment, but it must be passed soon to have the needed impact.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
U.S. Unemployment
Percentage of U.S. work force not employed, seasonally adjusted:
January: 4.2%
*
Source: Labor Department
