Washington – The nation’s unemployment rate dropped to a 4 1/2-year low as businesses cranked up hiring in January, an encouraging sign that the economy started the year on the right foot.
The latest jobs picture, provided by the Labor Department today, suggested that companies are feeling better about the economy’s prospects as well as their own and thus are more inclined to hire. Good weather in parts of the country also helped, especially for construction work.
The unemployment rate dropped from 4.9 percent to 4.7 percent, the lowest since July 2001.
For blacks, the rate fell to 8.9 percent, the best since September 2001. The unemployment rate for Hispanics dipped to a five-month low of 5.8 percent.
“The economy fired on all cylinders in January,” said economist Sung Won Sohn, president of Hanmi Bank.
Payrolls grew by 193,000 in January, up from 140,000 in December. Job growth for December as well as for each of the months going back to August turned out to be stronger than the government previously reported.
Employment gains were fairly widespread last month.
Construction, manufacturing, health care, financial activities and other industries boosted payrolls. That blunted job losses in other areas including retailing, government and broadcasting.
“There’s no question we’re getting back to better days for job creation,” said Ken Mayland, economist at ClearView Economics.
“There’s been a sense of unease in the American workplace and this should help relieve that.” Americans have expressed anxiety about the economy, polls indicate.
President Bush, coping with relatively low job-approval ratings, is seeking to ease those fears.
Bush, who welcomed the new jobs figures, spoke today about ways to make the country more competitive and is pushing plans to deal with pocketbooks issues, such as high energy prices and rising health care costs.
“We want our people working. We want people to be able to realize opportunity and hope. And in order to do that you got to have a growing economy, obviously,” Bush said. “I think keeping taxes low is an important way to make sure this economy continues to grow.” The president wants Congress to make his tax cuts permanent.
Democrats, however, contend that the tax cuts mostly helped the wealthy, did nothing to help the jobs climate and are a big reason why the government’s balance sheets are bleeding red ink.
For all of 2005, the economy created 1.98 million jobs – close to the 2.1 million generated in 2004, according to annual revisions to the payroll figures released today. The economy lost jobs in 2001 and 2002 but posted a tiny gain in 2003.
The economy suffered through a brief recession in 2001, starting in March and ending in November. The job market was especially hard hit and had trouble getting back to full throttle.
During Bush’s first term in the White House, job growth turned out to be flat – leaving him open to Democrat attacks about his track record on job creation. The government’s annual revisions wiped out the tiny 119,000 gain in jobs previously reported for Bush’s first term.
“There is still a lot of catching up to do in a labor market that went through the most protracted jobs slump in decades,” said Sen. Jack Reed, D-R.I. “At this point in the last recovery, the economy had created nearly 5 million more jobs than we have seen in this recovery.” Employees’ average hourly earnings, meanwhile, climbed to $16.41 in January, up 0.4 percent from December.
While wage growth is good for workers, big increases – if sustained – would be troubling to investors and economists who fret about inflation.
To fend off inflation, the Federal Reserve on Tuesday boosted a key interest rate to its highest point in nearly five years. New Federal Reserve Chairman Ben Bernanke will decide the next rate move at the Fed’s next meeting, March 28. Many economists believe another rate increase is likely to come then.
Analysts believe the pickup in workers’ wages should help support consumer spending, a key shaper of overall economic activity. Retailers reported Thursday that they rang up better-than-expected sales in January. Economists predict the economy, which grew by an anemic 1.1 percent rate in the final quarter of last year, is rebounding smartly in the January-to-March quarter and should clock in at a 4 percent growth rate.
In other economic news: – The Institute for Supply Management reported that the service sector posted respectable – but slower growth in January. The group’s index dipped to 56.8 from 61.0 in December. A reading above 50 points to growth, while a figure below that signals contraction.
– The Commerce Department said factory orders rose 1.1 percent in December, the third straight monthly increase. For all of 2005, factory orders rose 8.1 percent, down from a 9.7 percent increase in 2004.
