U.S. Economy Unexpectedly Sheds 17,000 Jobs

Discussion in 'Political Zone' started by jterrell, Feb 1, 2008.

  1. jterrell

    jterrell Penguinite

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    Published: February 1, 2008

    The economy lost 17,000 jobs in January, the Labor Department reported on Friday, the first decline in four years and the most striking evidence yet that the United States may be slipping into a recession.

    Jobs disappeared across a broad spectrum of professions, with the steepest losses coming in the manufacturing, construction and goods-producing industries.

    The unemployment rate, after jumping to 5 percent in December, fell back slightly, to 4.9 percent.

    “This is the clearest signal yet that the job market is either in or teetering on a recession,” said Jared Bernstein, senior economist at the liberal Economic Policy Institute in Washington.

    With the collapse of the housing market, trouble on Wall Street and the continuing fallout of the subprime mortgage crisis, many economists have pointed to the continued growth in the labor market as the final holdout in a sluggish economy.

    But the employment report puts the job market in a startlingly different light. Economists had predicted a substantial gain in January payrolls, and early signs pointed to a relatively strong report. Instead, the government reported the first decline in jobs since August 2003.

    “There’s a race going on between an economy that’s gathering weakness and aggressive monetary and fiscal policy,” said Ethan Harris, chief United States economist at Lehman Brothers. “Whether we have a recession in the U.S. or not depends on which of these two forces moves quicker.”

    Mr. Harris noted that the employment data can be quite volatile from month to month. The last reported monthly decline, in August 2007, was later revised up to a 74,000 gain.

    Just last month, the December report showed an anemic 18,000 rise in payrolls, prompting a significant downturn in the stock market. On Friday, the Labor Department raised that estimate to a gain of 82,000 jobs.

    “People were saying the recession started in December,” Mr. Harris said. “Look, it didn’t. December was fine.”

    Still, there were several signs of weakness in the employment report. Payrolls at private companies increased by a mere 1,000 jobs. Businesses are reducing the number of hours that their employees work.

    And workers’ salaries have effectively fallen in the last 12 months. The average hourly wage for rank-and-file workers — about 80 percent of the total work force — rose 3.7 percent since last January, below the pace of inflation.

    Average hourly earnings ticked up 0.2 percent last month, slowing from a 0.4 percent rise in December.

    The government also sharply lowered its estimates for employment in 2007 as a whole. In November, for example, the government had said 115,000 jobs were created. That number was reduced to 60,000 in the latest report.

    The jobs report was accompanied on Friday by a batch of mixed economic data. Manufacturers appeared to recover from a sudden drop in business in December, as a closely watched indicator — a survey by the Institute for Supply Management — ticked up on a surge in foreign and domestic demand.

    The I.S.M. index had fallen to 47.7 in December, setting off concern on Wall Street, but that figure was revised up to 48.4. The index was at 50.7 for January, suggesting that December’s downturn was a momentary blip.

    Despite the waves of bad economic news, American consumers were more confident about the state of the economy in January, according to a survey by the University of Michigan and Reuters. Consumer confidence rose to a reading of 78.4 from 75.5 in December.

    Finally, the Commerce Department reported that spending on construction projects fell 1.1 percent in December. The decline was mostly due to the problems in the housing markets, as home builders cut back on groundbreakings in response to lagging sales. Nonresidential construction was flat for the month.

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