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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 job market recovery was proceeding apace if not gaining speed. Many investors also saw the data as a sign of strength. Government bonds sold off, while 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 pushed the unemployment rate to 9 percent from 9.4 percent in December. It has dropped 0.8 percentage point since November, the biggest two-month decline since 1958.
“The payroll details and the drop in unemployment signal that there is an underlying improvement in the labor market buried under the snow and ice,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
Still, the decline in the jobless rate 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 sounded a more upbeat note on the economy, but said “it will be several years before the unemployment rate has returned to a more normal level.”
Economists estimated that blizzards, which pounded the Northeast in January and buried cities in knee-deep snow, reduced payrolls by between 50,000 and 100,000.
Signs of underlying strength in the labor market were also yielded by revisions to November and December payrolls, which showed 40,000 more jobs created than previously estimated.
The U.S. Treasury debt sell-off pushed the spread between two-year yields and 10-year yields to an 11-month high. Stocks on Wall Street were little changed in mid-afternoon.
JOBS MIGHT BE UNDERSTATED
Though the Labor Department’s payroll count continues to show moderate growth, independent surveys have suggested a pick-up in the pace of job creation, raising concerns that the government might be missing growth coming from new businesses.
Labor Department chief economist Betsey Stevenson told reporters the count was likely falling short, just as faulty estimates of how many companies were created or destroyed led to an understatement of job losses during the recession.
“It’s a challenge for the establishment survey to be able to accurately record the number of businesses that are starting up and the number of businesses that are shutting their doors,” Stevenson said.
“Now that we are in a recovery it’s most likely, but we won’t know for sure until next year, that we are missing a lot of businesses that are opening their doors and that we’re over estimating the number of business that might be shutting their doors.”
The labor market’s recovery has lagged the broader economy, which grew at a 3.2 percent annual rate in the fourth quarter. Getting the job market on a solid growth path is critical for President Barack Obama who faces re-election next year.
The head of the White House Council of Economic Advisers, Austan Goolsbee, told Reuters Insider the employment report showed “continued progress but it’s not fast enough.”
A Labor Department official said the household survey found that 886,000 Americans had been kept home by the heavy snowstorms, roughly double the number who are snow-bound in a typical January.
Still, the separate survey of establishments counts someone as employed even if they worked only one hour during the survey period.
Economists said the data, excluding the weather effect, was consistent with economic growth above 3 percent. They will be watching to see if the drop in the jobless rate is sustained.
If it is “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,” said Michael Gapen, an economist a Barclays Capital in New York.
Last month’s drop was encouraging because it reflected more people finding work. In recent months, a large portion of the decline in the jobless rate had reflected people giving up the search for work, meaning they were no longer counted among the ranks of the unemployed.
WEATHER HITS CONSTRUCTION
A broad measure of unemployment that includes workers who want a job but have stopped looking and those working part time for economic reasons dropped to its lowest level since April 2009. The number of long-term unemployed also fell.
Last month, the private services sector added only 32,000 jobs after increasing 146,000 in December. Payroll increases in goods-producing sectors rose 18,000, with manufacturing recording its largest gain since August 1998.
Severe weather hit construction payrolls, which dropped 32,000 last month. There were also large declines in the employment of couriers and messengers.
Government payrolls dropped for a third straight month, pulled down by state and local governments.
Copyright © 2011 Reuters