(Reuters) – The economy created jobs at the fastest pace in nine months in January and the unemployment rate dropped to a near three-year low of 8.3 percent, providing some measure of comfort for President Barack Obama who faces re-election in November.
Nonfarm payrolls jumped 243,000, the Labor Department said on Friday, as factory jobs grew by the most in a year. The gain in overall employment was the largest since April and outpaced economists’ expectations for a rise of only 150,000.
The report pointed to underlying strength in the economy, despite expectations that growth will slow in the first quarter.
Economists had expected the jobless rate to hold steady at 8.5 percent. The rate is the lowest since February 2009 and has dropped 0.8 percentage point since August.
The decline last month reflected large gains in employment in the separate household survey from which the unemployment rate is derived.
“It’s certainly supportive of the U.S. recovery and suggests that momentum is gathering pace,” said Brian Dolan, chief market strategist at FOREX.com in Bedminster, New York.
U.S. Treasury debt prices fell sharply on the report, while stock index futures surged. The dollar rose against the yen.
The continued labor market improvement could be a relief for Obama who faces a tough re-election.
The report contrasted with a glummer assessment of the economy’s prospects offered by the Federal Reserve last week and it could lessen chances of the central bank launching another round of asset purchases to spur a stronger recovery.
Chairman Ben Bernanke said the Fed was mulling further purchases to speed up the recovery. It has already bought $2.3 trillion in bonds to keep rates low and spur the economy.
“Certainly the Fed will welcome it but they remain worried about other areas of the economy, namely housing. This should not change its view on the economy,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York.
The U.S. central bank said it would probably hold interest rates near zero at least through 2014, citing still-high unemployment.
BROAD JOB GAINS
Job gains last month were widespread, with even the transportation and warehousing sector increasing payrolls.
The tenor of the report was further strengthened by revisions to November and December payrolls data, which showed 60,000 more jobs created than previously reported.
In addition, average hourly earnings rose four cents, which should help to support spending. The report suggested that expectations of a slowdown in U.S. economic growth in the first quarter were not yet impacting on companies’ hiring decisions.
Employment in the private sector surged 257,000 – the largest gain since April. Government payrolls fell 14,000, the least amount since September.
The U.S. economy grew at a 2.8 percent annual rate in the final three months of 2011, quickening from 1.8 percent in the third quarter. However, the rebuilding of stocks by businesses accounted for two-thirds of the rise, setting the economy up for a slower growth pace this quarter.
Growth is also seen moderating as the European debt crisis, which has already pushed some economies in the region into recession, takes an edge off U.S. exports.
Still, there are signs that the economy continues to have momentum. Auto sales were buoyant in January, factory activity hit a seven-month high and the four-week average of new jobless claims fall through the month.
While job growth has quickened there are no jobs for three out of every four unemployed people and 19.3 million Americans are either out of work or underemployed.
CAUTIOUS OPTIMISM
But there is reason for cautious optimism. The unemployment rate has declined for five straight months, partly because of unemployed workers giving up the hunt for a job but also because people are finding work.
A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, slipped to 15.1 percent in January from 15.2 percent in December.
The January household survey data incorporated new population controls. The department also released annual revisions to the payrolls data from the survey of employers and introduced new factors to adjust for seasonal fluctuations.
It said the level of employment in March of last year was 165,000 higher than it had reported, on a seasonally adjusted basis.
Mild winter weather boosted construction employment last month, which added 21,000 after a 31,000 increase in December. Manufacturing surged 50,000, the largest rise in a year, after rising 32,000 the prior month.
That contributed to the goods-producing sector posting 81,000 jobs last month, the most since January 2006.
Transportation and warehousing employment increased 13,100 and courier jobs only fell 1,500. Last month, the Labor Department reported a large increase in courier jobs in December, but revisions showed they actually declined.
Retail employment rose 10,500 after gaining 6,200 in December. Temporary help services jumped 20,100 after rising 8,300.
(Reporting By Lucia Mutikani; Additional reporting by Julie Haviv and Steven C. Johnson in New York; Editing by Andrea Ricci)
