Credit Commentary

U.S. unemployment rate falls unexpectedly, but job losses continue

By Zarana on Tuesday, February 09 2010

The job market outlook has improved with January's unexpected decline in the unemployment rate, which fell to 9.7 % from 10 % in December as a sign of gradual recovery in the overall economy. However, the job losses continue to mount further. Overall, the economy lost 20,000 jobs in January, disappointing expectations at some level that 15,000 jobs would be created.

The unemployment rate fell to its lowest level since August, when analysts expected an increase to 10.1 %. So far 8.4 million Jobs have been vanished in the last two years; this is about four times the net job losses in the deep recessions of the early 1980s and 1.2 million more than previously estimated.

More than 4 million jobs have been lost since Obama took office in January 2009. Early last year, Obama’s economic advisers forecast the $787 billion stimulus plan would keep unemployment below 8%.

The employment increased by 541,000 workers last month and the number of people in the labor force rose. Manufacturers hired more workers for the first time in three years, expanded hours and boosted pay, which may lift consumer spending and sustain growth

Payrolls at builders fell 75,000 last month after decreasing 32,000. Financial firms reduced payrolls by 16,000, after a 7,000 decline. Service industries, which include banks, insurance companies, restaurants and retailers, added 40,000 workers after subtracting 96,000 in December.

Retail payrolls increased by 42,000 after an 18,000 decline.

The number of temporary workers increased 52,000 in January. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff.

The underemployment rate, which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking , fell to 16.5% from 17.3%.

The average workweek for all workers rose to 33.9 hours in January from 33.8 the prior month. The increase signals companies are turning more part-time workers into full-time employees. Average weekly earnings increased to $761.06 from $757.46.