The unemployment rate in the U.S. unexpectedly dropped to 9.7 percent in January, indicating the labor market may be poised to climb out of its deepest slump since World War II.
More than half a million Americans found work, a Labor Department report showed today in Washington, helping push the jobless rate to the lowest since August. A separate survey of employers showed payrolls declined by 20,000 as construction companies and state and local governments cut back.
Manufacturers hired more workers for the first time in three years, expanded hours and boosted pay, which may lift consumer spending and sustain growth. Revisions to previous data increased the number of jobs lost in the recession to 8.4 million, adding impetus to the Obama administration’s push for fresh government measures to boost employment.
“The labor market, six months after the economy turned positive, is beginning to find its bottom,” said Neal Soss, chief economist at Credit Suisse in New York, who forecast a payroll drop of 25,000. “We’re still teetering on the cusp of job growth.”
The dollar rose 0.3 percent to 89.28 yen at 11:06 a.m. in New York, from 89.05 yesterday. The Standard & Poor’s 500 Index fell 0.2 percent to 1,060.55 as concern European governments will struggle to fund deficits overshadowed the unexpected decrease in the unemployment rate.
Updating Equipment
Companies such as Cisco Systems Inc. plan to add staff as businesses update equipment and stimulus plans revive sales worldwide. San Jose, California-based Cisco, the biggest maker of networking equipment, predicted accelerating sales growth and said it will hire 2,000 to 3,000 people in the next several quarters as customers resume spending to deal with surging data traffic.
“While we believe the recovery is now occurring, no one knows for sure how strong it will be, how long it will last or the extent of new-job creation,” Chief Executive John Chambers said on a conference call this week.
The survey of households showed employment increased by 541,000 workers last month and the number of people in the labor force rose. The gain brought the participation rate, or the share of the population in the workforce, up to 64.7 percent in January from 64.6 percent.
‘Cautious Confidence’
Labor Secretary Hilda Solis called the decline in the unemployment rate a sign of “very cautious confidence.”
“It’s still unacceptably high and we’re going to continue to work on that,” Solis said in an interview with Bloomberg Television.
President Barack Obama has called job creation his top priority this year as administration projections forecast the unemployment rate to average 10 percent through 2010.
Obama will today back a temporary increase in Small Business Administration Loans from $350,000 to $1 million to encourage small business hiring, an administration official said. The president has previously endorsed $33 billion in small business tax cuts and incentives for hiring as well as a plan to use $30 billion of bailout money paid back by Wall Street financial institutions to help community banks make loans to small businesses.
More than 4 million jobs have been lost since Obama took office in January of 2009, today’s figures showed. Early last year, Obama’s economic advisers forecast the $787 billion stimulus plan would keep unemployment below 8 percent.
‘Long Winter’
“The long winter of this Great Recession seems to be drawing to a close,” said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “To get a self-sustaining recovery, you need more. It is not spring yet, but the worst times are clearly behind us.”
Employment declined a revised 150,000 in December and increased 64,000 a month earlier. The revisions subtracted 5,000 from payroll figures previously reported for those two months.
The Labor Department today also issued the annual benchmark update showing the economy lost 930,000 more jobs than previously estimated in the 12 months ended March 2009.
Government payrolls decreased by 8,000 in January. State and local governments reduced employment by 41,000 during the month, while the federal government added 33,000. The increase at the federal level reflected in part the hiring of temporary workers to conduct the 2010 census.
Earnings, Hours
With this report, the Labor Department for the first time issued data on earnings and hours for all workers. Before today, the figures reflected changes in earnings and hours only for production staff.
The average workweek for all workers rose to 33.9 hours in January from 33.8 the prior month. The increase signals companies are turning more part-time workers into full-time employees. The number of part-time workers for economic reasons dropped to 8.3 million in January from 9.2 million the previous month.
Average weekly earnings increased to $761.06 from $757.46.
Factory payrolls increased 11,000 in January, the biggest gain since April 2006, after falling 23,000 in the prior month. The median forecast by economists called for a drop of 20,000.
Payrolls at builders fell 75,000 last month after decreasing 32,000. Financial firms reduced payrolls by 16,000, after a 7,000 decline the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, added 40,000 workers after subtracting 96,000 in December.
Temporary Workers
The number of temporary workers increased 52,000 in January. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff.
Retail payrolls increased by 42,000 after an 18,000 decline.
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 — fell to 16.5 percent from 17.3 percent.
The economy grew at a 5.7 percent annual rate in the fourth quarter, the biggest gain in six years, according to data from the Commerce Department released last week.
Some companies are still trimming payrolls. Warren Buffett’s Berkshire Hathaway Inc. cut about 3,000 jobs since December after customers scaled back orders for building-related materials.
“If you look at our carpet business, our brick business, our insulation business, all of those businesses have had significant reductions in employment,” Buffett said in an interview in Omaha, Nebraska, on Jan. 20. “The day the orders come in, we hire back. But there’s no reason to hire people if they don’t have anything to do.”
By Timothy R. Homan – businessweek.com
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