The U.S. jobless rate unexpectedly fell in January to the lowest in three years as payrolls climbed more than forecast.
The unemployment rate dropped to 8.3 percent, the lowest since February 2009. The 243,000 increase in jobs was the biggest in nine months and exceeded all forecasts in a Bloomberg News survey, Labor Department figures showed Friday.
Service industries grew by the most in a year, according to a separate report.
“The payroll gains we’re seeing in this report are consistent with significant improvement in consumer spending,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “If we hold at these levels, it will change a lot of expectations for economic growth, the labor market recovery, inflation and the [Federal Reserve’s] policy response.”
The median projection in the Bloomberg survey called for payrolls to rise by 140,000. Estimates of the 89 economists ranged from increases of 95,000 to 225,000.
Revisions in Friday’s report show the nation created 300,000 more jobs last year — December to December — than earlier estimated. But 5.6 million more jobs are needed to bring employment back to what it was in December 2007, the official start of the recession.
In addition, an average of about 150,000 new jobs are needed each month simply to keep pace with U.S. population growth.
While the January jobs numbers were better than the consensus estimates of many economists, they were “not terrific,” said Ken Mayland, head of ClearView Economics in the Cleveland suburb of Pepper Pike. Mayland said he thought jobs would rise by 150,000 in January.
“Jobs and income growth are what have been lacking from this recovery, and the January results help move the ball forward on these fronts,” Mayland wrote in a note to clients. “But this latest gain can still be judged ‘light’ when compared to other post-deep-recession periods which produced 400,000 monthly job gains” on a smaller labor force base.”
The temporary help employment numbers, which rose by 20,000 last month, show that many employers still are not fully convinced that an economic recovery is under way, Mayland wrote.
If the January jobs figures are sustained, the Federal Reserve will need to start raising interest rates well before 2014, he said.
While not part of the January national jobs figures, the latest Ohio unemployment claims show that the state this week returned to “job growth” rates, wrote George Zeller, a Cleveland economic analyst.
The drop in Ohio unemployment claims was dramatic and good news, Zeller wrote.
The number of Ohio counties with “job destruction” levels of new unemployment claims fell from 64 three weeks ago to 33 two weeks ago, to 13 last week and to 11 this week, he said.
The January figures likely will be revised, Zeller said. January historically is when Ohio has the largest amount of layoffs in a given year, he said.
Gains in employment last month were broad-based, including manufacturing, construction, temporary help agencies, accounting firms, restaurants and retailers.
Employment, overtime and hours worked in factories increased as manufacturers, who have been leading the two-year recovery, boosted production to rebuild inventories and meet global demand for their goods.
Assembly-line workers put in an average 41.9 hours of work each week, the most since January 1998, while overtime hours climbed to the highest since March 2007. Manufacturing payrolls increased by 50,000 in January, the most in a year.
The unemployment rate, derived from a separate survey of households, was forecast to hold at 8.5 percent, according to the survey median. The drop in the jobless rate reflected a 381,000 decrease in unemployment at the same time 250,000 Americans entered the labor force.
Private payrolls, which exclude government agencies, rose 257,000 in January after a revised gain of 220,000 the prior month, marking the biggest back-to-back gain since March-April. It was projected to climb by 160,000.
Employment at service-providers increased 162,000, the most in four months and reflecting faster job gains in retail, transportation and leisure and hospitality.
The Institute for Supply Management’s index of non-manufacturing industries, which account for almost 90 percent of the economy, rose to 56.8 in January from 53 a month earlier. The Tempe, Ariz., group’s measure was projected to climb to 53.2, according to the median forecast in a Bloomberg survey of economists. Readings above 50 signal growth.
Construction companies added 21,000 workers last month. The number of people unable to go to work because of bad weather, a proxy for the climate’s effect on the labor market, was 206,000 last month, less than half the 424,000 average for the month since 1976. The shortfall signals favorable conditions may have played a role in the gain in employment, according to economists like Neil Dutta at Bank of America Corp.
Government payrolls decreased by 14,000 in January, reflecting cuts at the federal and local levels.
Average hourly earnings rose 0.2 percent to $23.29, today’s report showed. The average work week for all workers held at 34.5 hours.
The so-called underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — decreased to 15.1 percent from 15.2 percent.
Beacon Journal staff writers Jim Mackinnon and David Knox contributed to this report.
