A Stern Glance

Theunemployment rate dropped unexpectedly in January to 9.7 percent, while employers shed 20,000 jobs, according to a report that offered hope the economy will add jobs soon.

The unemployment rate dropped from 10 percent because a survey of households found the number of employed Americans rose by 541,000, the Labor Department said Friday. The job losses are calculated from a separate survey of employers.

Excluding the beleagured construction industry, which shed 75,000 jobs, the private sector added 63,000 positions.

The unemployment rate fell to its lowest level since August. John Silvia, chief economist at Wells Fargo, said the decline wasn’t a result of a shrinking labor force, which has held the rate down in previous months.

The department also revised its past employment estimates to show that job losses from the Great Recession have been much worse than previously stated. The economy has shed 8.4 million jobs since the downturn began in December 2007, up from a previous figure of 7.2 million.

That’s the most jobs lost in any recession, as a percent of total employment, since World War II.

The figure for November was revised higher, however, to show a gain of 64,000 jobs. That was initially reported as a gain of 4,000.

Much of January’s report offers hope that employers are starting to reverse course and may start adding jobs soon. Aside from November’s gain, January’s job losses were the smallest since the recession began and are down from the huge loss of 779,000 jobs in January 2009.

Randy Garcia, Chief Executive Officer of Investment Company Counsel in Las Vegas, said “The drop to 9.7 percent unemployment figure released this morning is encouraging and the lowest level since last August. The decline from last month’s 10 percent, is a result of about 540,000 Americans finding jobs. 

“With the recent report that further quarter Gross Domestic Product ran at 5.7 percent on an annualized basis, clearly we are at least approaching the right track. We will need to see this sort of GDP growth throughout the year in order to continue to generate job growth.

“At The Investment Counsel Company, we view the current economic recovery as a “square root” pattern, and not as a robust “V” or a double-dip recession “W,” as many analysts suggest.  We see modest but steady growth, at best, for the next three quarters and employment increasing slightly over that period.  However, even if the economic recovery creates 200,000 new jobs per month, in line with the expansion of the 1990s, the labor market will not return to full employment until 2016.” 

The manufacturing sector added jobs for the first time since January 2007. Its gain of 11,000 jobs was the most since April 2006.

Retailers added 42,100 jobs, the most since November 2007, before the recession began. Temporary help services gained 52,000 jobs, its fourth month of gains. That could signal future hiring, as employers usually hire temp workers before permanent ones.

The average work week increased to 33.3 hours, from 33.2. That indicates employers are increasing hours for their current workers, a step that usually precedes new hiring.

The number of part-time workers who want full-time work, but can’t find it, fell by almost 1 million. That lowered the “underemployment” rate, which also includes discouraged workers, to 16.5 percent from 17.3 percent.

The federal government has begun hiring workers to perform the 2010 census, which added 9,000 jobs. That process could add as many as 1.2 million jobs this year, though they will all be temporary.

But job cuts at the state and local levels canceled out those gains, as government employment fell by 8,000.

Most of the 75,000 jobs lost in the construction industry came from the commercial building sector, the department said. Construction lost more jobs than other sector.

Still, jobs remain scarce even as the economy is recovering: Gross domestic product, the broadest measure of the nation’s output, has risen for two straight quarters. GDP rose by 5.7 percent in the October-December quarter, the fastest pace in six years.