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US unemployment rate falls to the lowest levels since early 2009

Text by News Wires

Latest update : 2011-02-05

Despite the conflicting signals in the Labor Department's report on Friday, U.S. employment rose by a meager 36,000 jobs in January while the unemployment rate fell to 9 percent.

REUTERS - U.S. employment rose by a meager 36,000 jobs in January, far less than expected, as severe snow storms slammed large parts of the nation, but the unemployment rate fell to its lowest level since April 2009.

Despite the conflicting signals in the Labor Department's report on Friday, economists agreed a recovery in the labor market was proceeding apace if not gaining speed. Many investors also saw the data as a sign of strength. Government bonds sold off and the dollar rallied against the yen and the euro.

The payrolls gain reported by U.S. employers was a quarter of the 145,000 gain economists had expected. But a separate household survey, which is used to determine the jobless rate, showed nearly 600,000 more people reported they were employed.

That surge in employment pushed the unemployment rate to 9 percent from 9.4 percent in December. The rate has dropped 0.8 percentage point since November, the biggest two-month decline since 1958.

"Looking at the two surveys together, they suggest that employment is going to pick up. Clearly it has lagged the other measures of activity, but we're in a jobs market recovery now," said Zach Pandl, U.S. economist at Nomura Securities International in New York.

Economists estimate the blizzard, which pounded the Northeast in January and buried cities in knee-deep snow, reduced payrolls by between 50,000 and 75,000.

The government also revised November and December payrolls to show 40,000 more jobs created than previously estimated.

Outlook improoving

Data on manufacturing and retail sales has suggested the economy's strong momentum continued into the new year. Economists said January's employment report, excluding the weather effect, was consistent with the economy growing above 3 percent.

The labor market has lagged the broader economy, which grew at a 3.2 percent annual rate in the fourth quarter.

"We see significant potential strength in this report and will be looking to see whether the drop in the unemployment rate persists," said Michael Gapen, an economist a Barclays Capital in New York.

"If it does, then it will be a further signal that underlying job growth is stronger than reported and conditions in labor markets are better than advertised by the establishment survey."

Last month's drop in the unemployment rate was encouraging because it reflected more people finding work, even after adjustments for updated population controls.

In recent months, a large portion of the decline in the jobless rate reflected people giving up the search for work, meaning they were no longer counted among the ranks of the unemployed.

Still, the decline is unlikely to discourage the Federal Reserve from completing its $600 billion government bond-buying program to support the economy.

Fed Chairman Ben Bernanke on Thursday acknowledged the pick-up in the recovery, but said "it will be several years before the unemployment rate has returned to a more normal level."

The Labor Department also finalized its annual benchmark revisions to its payroll series, which showed the level of employment for March 2010 was overstated by 378,000.

Last month, the private services sector added only 32,000 jobs after increasing 146,000 in December. The sector accounts for more than 80 percent of jobs in the United States.

Payroll increases in goods-producing sectors rose 18,000, as manufacturing employment grew 49,000, the largest increase since August 1998, after rising 14,000 in December.

Severe weather could have affected construction payrolls, which dropped 32,000 last month. There were also large declines in the employment of couriers and messengers.

Government payrolls dropped 14,000 in January, marking a third straight month of declines, pulled down by state and local governments.
 

Date created : 2011-02-05

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