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U.S. unemployment rate falls unexpectedly, but job losses continue

The jobless rate declines to 9.7% in January from 10% in December. However, employers cut a net 20,000 jobs last month.

February 06, 2010|By Don Lee
  • A job seeker looks over information during a career fair at the San Diego Convention Center.
A job seeker looks over information during a career fair at the San Diego… (Sandy Huffaker / Getty Images )

Reporting from Washington — U.S. workers and the Obama administration finally got some good news on the job front Friday as the unemployment rate unexpectedly tumbled out of double-digit terrain for the first time in four months.

In addition to the jobless rate's drop to 9.7% in January from 10% in December, the Labor Department report offers a number of signs pointing to a turnaround in the employment market and a continuing, gradual recovery in the overall economy. Among those signs was the first increase in factory jobs in three years.

A sharp decline in the number of people working part time involuntarily was "the most promising news out of today's report," said John Challenger, chief executive of outplacement firm Challenger, Gray & Christmas. "Overall, we are definitely heading toward a job market recovery."

The positive news was tempered by newly revised data showing the country lost a staggering 8.4 million jobs in the last two years -- about four times the net job losses in the recession of the early 1980s and 1.2 million more than previously estimated.

The severe destruction of jobs since December 2007, when the latest recession officially began, means that it will take years for millions of distressed families -- and the economy as a whole -- to climb back from what is being called the Great Recession.

"The crater we have is just incredible," said Heidi Shierholz, a labor economist at the Economic Policy Institute, a liberal think tank in Washington.

Factoring in the growing U.S. population and new entrants to the job market, Shierholz estimated that employers would need to create more than 400,000 jobs a month over the next three years to fully recover the payroll jobs lost during the recession. By any measure, she said, that is a tall order, and employer payrolls are still falling, albeit by just 20,000 in January, down from 150,000 in December.

Moreover, the unemployment rate is expected to rise in the coming months as more workers return to the job market.

But for now the drop in the jobless rate gives a political boost to President Obama and his economic advisors. They have come under increasing pressure as the public has wearied of high unemployment.

Although administration officials said the January report pointed to hopeful signs of a healing labor market, they also called the unemployment numbers unacceptably high and continued to campaign Friday for Obama's proposals to give small businesses more access to loans and tax cuts for adding employees.

Republican lawmakers, meanwhile, called attention to the report's upwardly revised job losses during the recession, saying that nearly 3.3 million jobs had been lost since Obama's $787-billion economic stimulus plan was passed a year ago.

White House economists contend that without the stimulus package, the economy would have lost 1.5 million to 2 million more jobs than it did, a claim backed by some private economic firms.

The large drop in the jobless rate from December seemed incongruent with data in the same government report that said employers shed jobs last month.

The main explanation is that the unemployment figure is based on a survey of households, so it includes the self-employed. The payroll jobs statistics are derived from a separate sample of private and government employers.

The household survey found that 541,000 more people were employed in January compared with December and that there were 430,000 fewer people who said they were unemployed last month.

That brought the jobless rates down for men and women, for the young and the middle-aged and for high school and college graduates. But the unemployment rate for African Americans overall bucked the trend, edging up to 16.5%.

In another sign of recovery, the number of people who said they were working part time because their hours had been cut or they couldn't find full-time jobs fell to 8.3 million from a record 9.2 million.

Many employers have said they are reinstating work hours and days that were slashed during the recession. Businesses typically take such steps before adding employees to their payrolls.

The government's broader measure of unemployment and underemployment, which includes involuntary part-time workers and discouraged workers, fell to 16.5% in January from 17.3% the previous month. But in another measure of the distress in the labor market, the ranks of workers unemployed for six months or longer rose last month to a record 6.3 million people -- 4.5 times the number just two years earlier.

The Labor Department also unveiled its annual revision of payroll jobs data for the previous two years based on employer tax records. This year's revisions were particularly large: They increased by 1.2 million the job losses since April 2008. Analysts attribute that partly to deeper cuts at small firms that are harder to track and estimate in the monthly reports.

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