Jobs Report Adds to Hope of Recovery
The U.S. economy offered tantalizing new hints Friday it may be recovering faster than expected as the government reported that the January unemployment rate slipped to 5.6% and that employers shed jobs at the slowest pace in five months.
Separately, an industry report showed the nation’s battered manufacturing sector expanded production and collected new orders for a second straight month, breaking almost a year-and-a-half-long string of setbacks.
But no one, including notoriously optimistic investors, was breaking out the champagne over the latest reports. That’s because the jobless decline was accompanied by an inexplicably large plunge in the size of America’s labor force, and by figures showing a near-record number of jobless workers have run out of unemployment benefits.
“I wouldn’t trumpet this as evidence the recovery is here,” Timothy J. Bartik, senior economist with the nonpartisan Upjohn Institute for Employment Research in Kalamazoo, Mich., said of the new jobs figures.
The stock market certainly didn’t do much trumpeting. Worried other Enron-like accounting scandals may lurk in the wings, investors treated the new employment report as if it showed the recovery would be slower, not faster, in coming, and pushed stock prices down.
The Nasdaq composite index dropped 22.79 points, or 1.2%, to 1,911.24. The Standard & Poor’s 500 index fell 8 points, or 0.7%, to 1,122.20, while the Dow Jones industrial average slipped 12.74 points, or 0.1%, to 9,907.26.
Unemployment fell from 5.8% in December to 5.6%, the Labor Department said. The decline was the first since May and confounded forecasters who had predicted the rate would rise to 5.9%. Employers cut payrolls by 89,000 in January, according to the department, considerably less than December’s 130,000-job reduction. Virtually all the job losses were in manufacturing and construction and were partially offset by gains in services such as health care.
Although substantially higher than the national average, jobless rates among traditionally disadvantaged groups did not significantly change during the month, according to department officials. Unemployment among blacks fell from 10.2% in December to 9.8%. The rate among Latinos rose from 7.9% to 8.1%.
The biggest mystery of the day was what happened to the nation’s civilian labor force--the total of those working, plus those looking for work. The labor force suddenly shrank in January by 924,000 people, the biggest decline since the government started keeping records in 1948.
Analysts split into two camps on the meaning of the drop. Optimists wrote it off as a statistical fluke and the kind of thing that often happens in December and January when employment rises, then falls around the Christmas holiday season. Pessimists said it showed the economy has deteriorated to such an extent hundreds of thousands have given up hope of employment and stopped looking for work.
“I wouldn’t take the number too seriously, but the direction of [the] trend may be correct,” said Joel L. Naroff, a Holland, Pa., economist.
Analysts said one piece of evidence suggesting the trend is more than a fluke is a sharp drop both in the number of women working and the number counted as unemployed.
The employment total for adult women dropped by 103,000 in January while the unemployment total fell by more than 320,000, according to department statistics. The combination suggests that women are leaving the labor force in droves, said Lawrence Mishel, vice president of the Economic Policy Institute in Washington.
If the trend is underway, then although the unemployment rate has not reached high levels by historical standards, joblessness is still taking a nasty toll by leaving those who lose their jobs out of work for inordinate periods.
Other Labor Department figures show that the average amount of time that someone remains jobless is growing, leaving many workers without unemployment benefits.
A new analysis of department data by the liberal Center on Budget and Policy Priorities shows that 300,000 workers exhausted their regular 26 weeks of state-provided jobless benefits in December, a 75% increase over the previous December, and the largest number to run out of benefits in any December since 1973.
(Center analysts said that because benefit exhaustion data is not seasonally adjusted, statistics from one period can only be compared with those of the same period in previous years.) During the last three months of last year, 860,000 jobless workers ran out of benefits, a 70% increase from the previous year, according to the center analysis. About 132,000 of them were in California, the analysis showed.
In most previous recessions, exhausting state-provided benefits was of little consequence because Washington almost always helped finance extended benefit programs. But the rules for the current such program are so rigid that workers in only two states, Oregon and Washington, now qualify, and without legal changes few others are expected to join them.
“Congress needs to get off its duff and pass an extension,” said Wendell E. Primus, the center’s director of income security.
Although the new industry report on factory production and orders suggested the slump in American manufacturing may be close to over, the Labor Department said that factory employment dropped 89,000 last month, its 18th straight decline. Most of the additional job losses were in construction where employers shed 54,000 jobs.
The losses were partially offset by the addition of 62,000 jobs in retailing, which usually lets workers go in the post-holiday period.
Average hourly earnings of production and non-supervisory workers, who make up about 80% of the nation’s work force, remained steady at $14.59, the first time they have not increased in a year. Average weekly earnings declined $1.50.
