Posted on 05 Feb 2010
The United States economy shed 20,000 jobs in January, the government said Friday, deepening concern that relief from the deepest economic downturn in a generation would be slow to come. But even as the economy struggled to start creating jobs again, the unemployment rate fell to 9.7 percent from 10 percent in December.
As the broader economy gains steam and crucial sectors like manufacturing spring back to life, analysts say the recovery appears to be intact. But the nation’s stubbornly high unemployment rate remains a persistent thorn in the side of optimists, and economists expect the situation to worsen before it gets better.
Some forecasts call for the jobless rate to reach nearly 11 percent by year’s end, which would significantly dampen spending by consumers, a critical driver of growth. That has prompted concern that the economy could enter a painful period of slow growth or even fall into another downturn.
“We are turning the corner,” an economist for IHS Global Insight, Nigel Gault, said. “But the gains will probably not be big enough to make serious inroads into the unemployment rate for some time.”
The manufacturing sector showed signs of improvement, adding jobs for the first time since the onset of the recession in 2007. Construction continued to suffer, as builders grappled with a crisis in the commercial real estate market. Temporary jobs increased, a sign that employers were tentatively beginning to expand their ranks.
The results were greeted on Wall Street with caution. The major stock indexes opened higher before turning down in early trading, with many investors still rattled by a steep downturn in the market on Thursday amid worries about the stability of the European financial system. Analysts had expected the economy to create 15,000 jobs in January and for the unemployment rate to hold steady at 10 percent.
In its report, the government revised its job loss numbers for November, saying the economy gained 64,000 in that month rather than 4,000. But the picture in December was much worse than previously stated; the economy lost 150,000 jobs rather than the 85,000 originally reported. (In total, job losses in August, September and October of last year were 240,000 worse than original forecasts.)
The overall toll of the recession, meanwhile, grew larger: 8.4 million jobs have been lost since December 2007, the government said, nearly one million more than previously recorded. Those numbers jumped significantly from December because the Labor Department on Friday said it had completed a benchmark revision of job losses since April 2008.
Economists said the drop in the unemployment rate, which reached its lowest level since August, was a statistical quirk and probably did not indicate the start of a downward trend. The unemployment rate is gleaned from interviews with a random sample of Americans, and its results can be erratic. The monthly tally of job losses is considered a more reliable snapshot of the economy because it incorporates data from a large number of businesses.
The dissonance between the tepid recovery for the jobs market and robust turnaround for Wall Street has exacerbated populist tensions.