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Economy in Brief

U.S. Payrolls Fell Unexpectedly, Revisions & Jobless Rate Down Slightly
by Tom Moeller February 1, 2008

The Bureau of Labor Statistics reported that nonfarm payrolls fell in January by 17,000 versus expectations for a rise of 70,000. In December, the rise payrolls was revised to a stronger gain of 82,000, but November's increase was halved to 60,000. Moreover, the gain for all of last year was revised down slightly to 1.1% from the 1.3% reported earlier.

The decline in jobs during January was the first since August 2003. Five years ago, job declines continued through 2002 & 2003 though economic recession ended in November 2001.

Fewer jobs in government accounted for the outright decline in overall January employment. An 18,000 worker decline (+0.8% y/y) in gov't jobs overall owed to a 24,000 worker decline (+0.1% y/y) in state gov't jobs. That left employment in private industries last month to rise a negligible 1,000 (0.7% y/y) but a similar preliminary reading for December was revised up to a gain of 54,000.

In the private service sector employment rose by a weak 52,000 (1.4% y/y) although December's increase was about doubled to 115,000. Professional & business services jobs fell by 11,000 (+1.6% y/y), the first material m/m decline since 2004. Temporary help services jobs fell 9,000 (-3.3% y/y). Retail employment rose 11,200 (0.4% y/y) but jobs in finance fell 2,000 (-1.1% y/y), the eleventh decline in the last thirteen months (Here is where the earlier job numbers were revised down sharply.)

Jobs in education continued firm and rose 15,700 (3.1% y/y) while job gains in the health care sector also were strong and rose 30,900 (3.1% y/y). Jobs in the leisure & hospitality sector have been strong as well and rose 19,000 (2.7% y/y) in January.

Factory sector payrolls fell another 28,000. Construction employment fell as well, by 27,000, which was the seventh consecutive monthly drop.

Continuing to portend weakness in job creation was one month diffusion index of 46.2%. This measure of the breadth of job creation amongst industries was at its lowest level since 2003.

The unemployment rate slipped to 4.9% last month after the jump to 5.0% in December. Household employment rose 37,000 (0.2% y/y) while the labor force fell 42,000 (+0.6% y/y). Unemployment fell 79,000 (+7.6% y/y) but the labor force participation rate rose to 66.1%, its highest since last June.

Average hourly earnings rose 0.2%. Factory sector earnings jumped 0.5% (2.9% y/y) and private service-providing earnings rose 0.2% (4.0% y/y).

Employment: 000s January December November Y/Y 2007 2006 2005
Payroll Employment -17 82 60 0.7% 1.1% 1.8% 1.7%
      Previous -- 18 115 -- 1.3% 1.9% 1.7%
  Manufacturing -28 -20 -3 -1.9% -1.9% -0.5% -0.6%
  Construction -27 -45 -57 -3.6% -1.0% 4.9% 5.2%
Average Weekly Hours 33.7 33.8 33.8 33.9 (Jan. '07) 33.8 33.9 33.8
Average Hourly Earnings 0.2% 0.4% 0.3% 3.7% 4.0% 3.9% 2.7%
Unemployment Rate 4.9% 5.0% 4.7% 4.6% (Jan '07) 4.6% 4.6% 5.1%
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