Americans will have to wait at least another month to hear unambiguously good news regarding job growth in the U.S. The Labor Department announced Friday that the world's largest economy unexpectedly lost 20,000 jobs in January. Although the unemployment rate fell to 9.7% from 10% in December, economists caution that the fall could prove to be temporary. When many of the unemployed who have stopped looking for work start trying again, they'll be included in the unemployment rate, potentially pushing it back up.Compared to January 2009's monthly job loss of 779,000, this report shows that massive job cuts have ended. But it also shows that hiring has not rebounded.
A Bloomberg News economists survey had forecast flat job growth in January and the unemployment rate to rise to 10.1%.
The Labor Department also revised December's job loss total to 150,000 jobs from the previously released 85,000 loss, but it said November actually had a gain of 64,000 jobs from the initially reported increase of 4,000.
Further, the Labor Department revised its job loss total for the recession. It now estimates that about 8.4 million jobs have been lost since the downturn started in December 2007.
A separate unemployment gauge, which includes workers who can find only part-time work and discouraged workers, fell to 16.5% in January from 17.3% in December.
Some Positive Signs
While January's 20,000 job loss was a disappointment, the report had a few bright spots. First, temporary jobs, which usually signal a new hiring phase, increased by 52,000 in January. Since July, the temporary job category has added 247,000 jobs.
Second, the retail sector added an impressive 42,000 jobs, after scant gains in the past two months. Also, health care added 15,000 positions, and government added 33,000 jobs (including 9,000 for the 2010 U.S. Census).
On the downside, construction lost 75,000 jobs, transportation and warehousing lost 19,000, and manufacturing shed 11,000 jobs.
Average hourly earnings rose 5 cents to $18.89, and the average workweek rose to 33.9 hours from 33.8 hours in December.
A Lot Hinges on Job Growth
Further, not only will job growth (or lack thereof) help determine whether the U.S. economic expansion continues, it will say a lot about who leads the nation. That's because voters historically hold the party in power in Washington accountable for the nation's economic performance, with the U.S. unemployment rate being high on the list.
If the unemployment is high, voters remove the party in power -- in this case the congressional Democrats -- from office. If joblessness is low, they reelect the party in power. President Barack Obama is on the hot seat, too, but the focus is on the Democrats in Congress, due to their upcoming 2010 election.
Also, job growth in the U.S. may take on added importance globally as a result of recent financial developments in Europe. On Thursday, global equity markets fell substantially -- including a 268-point plunge in the Dow -- amid concern that Spain and Portugal might have government debt problems similar to Greece's long-known fiscal troubles. If that's the case, these weakened euro-zone nations would likely weigh on Europe's GDP growth. That will only heighten the need for stronger U.S. economic expansion to maintain adequate global growth. And a faster-growing U.S. economy requires job creation.
Not There Yet
Overall, the January jobs report is disappointing because it represents another month without adequate job growth. Also, investors should view the drop in the U.S. unemployment rate to 9.7% with caution. At least employers keep adding to temporary jobs, and that suggests permanent hiring will occur in the months ahead.
The growing U.S. economy is providing a tailwind for the job market, but the country -- assuming continued credit market healing -- is still at least a month or two away from sustained, adequate job growth.
Unemployment Falls to 9.7%, but 20,000 Jobs Were Lost in January