Washington, DC, Feb. 6--Payrolls grew in January at the fastest clip in three years but fell short of expectations.
Nonfarm businesses added 112,000 jobs to their payrolls in January. It was the largest gain since December 2000, and well above the revised 16,000-job gain seen at the end of last year. That number had initially been estimated at 1,000 jobs.
The unemployment rate fell a tenth of a percentage point to 5.6%, the lowest rate since President George W. Bush was inaugurated in January 2001.
Economists had expected payrolls to grow by 160,000 and for the unemployment rate to rise to 5.8%, according to a survey by Dow Jones Newswires and CNBC.
A recovery in the labor market has been cited by economists, including those at the Federal Reserve, as key to the economy's recovery. Expectations for job growth have increased as other signs emerge that the recovery is gaining momentum. Gross domestic product expanded by 3.1% in 2003, and most forecasters are betting it will grow more than 4% this year.
But the Fed has remained cautious to signal a rate increase until the labor market shows further signs of stability.
"Even at 4% growth, we're not necessarily exceeding by much the potential growth of the economy," Fed Governor Ben Bernanke said Thursday. "So the labor market will improve but probably not very quickly, and the slack in that labor market means we shouldn't expect to see rapid increases in wages over the next year."
Analysts said those views, which Bernanke has expressed before, suggested the Fed remains disinclined to raise interest rates this year.
Over the last three years, employers have cut more than two million nonfarm jobs. To replace those jobs within a year and keep up with population growth economists estimate businesses would need to create about 400,000 jobs a month. That far exceeds the average of the late 1990s economic boom. Most forecasters expect the economy to generate about 200,000 jobs a month this year.
In its report Friday, the Labor Department included its annual benchmark revisions, which showed that nonfarm employers continued to cut jobs through August of 2003. Since then, however, nonfarm jobs have grown 366,000.
In January, employers expanded payrolls in most major categories except manufacturing and professional business services. The manufacturing industry shed 11,000 jobs, less than half the decline in December. The professional business services industry lost 22,000 jobs, marking the first decline since August.
But the service-producing industry added 105,000 jobs, including 22,000 jobs in retail trade. The construction industry added 24,000 jobs, and the education and health-services industry added 22,000 jobs.
Average hourly earnings rose two cents to $15.49 in January. The average work week rose by 12 minutes to 33.7 hours.
