Business

US economy creates 243,000 jobs in January

  • 3 February 2012
  • From the section Business

The US economy created 243,000 jobs in January, the highest total for nine months, official figures show.

The rise was much more than expected. Analysts had forecast an increase of about 150,000 jobs.

The unemployment rate dropped to 8.3%, which was the lowest rate in nearly three years, and down from a revised rate of 8.5% in December.

News of the jobs growth caused shares to rocket up, with the Dow Jones index up 156 points at 12,862, its highest level since May 2008.

The Nasdaq index, which specialises in technology companies, soared to its highest level since December 2000 by the close of trading on Friday.

In Europe, the FTSE 100 index hit its highest level since July 2011 rising 1.8% while Germany's Dax closed up 1.6%. The Cac 40 in France was 1.5% higher.

Employment boost

However, a report on Wednesday by the US Congressional Budget Office, a federal agency, forecast that unemployment would climb to nearly 9% in the last three months of this year and peak at 9.2% early next year.

Friday's data from the Labor Department showed job growth had been widespread, with large gains in business services, leisure and hospitality, and manufacturing.

Leisure and hospitality, which includes restaurants and hotels, added 44,000 jobs.

Retailers added nearly 11,000 jobs, and professional and business services, which includes higher paying jobs in accounting, architecture and engineering, gained 70,000 - the most in 10 months.

Factories added 50,000 workers, much more than expected and a one-year high.

Retailers added 10,500 workers and construction employment rose by 21,000. Analysts believe the figure was helped by a mild US winter, which boosted employment in those sectors.

The report was also buoyed by revisions to November and December data, which showed 60,000 more jobs created across the two months than previously reported.

Upbeat data

Lindsey Piegza, economist at FTN Financial, said: "It was a better-than-expected report, the strongest report that we've seen in quite some time.

"The big question is whether the reason we're seeing the unemployment rate drop is because more and more people are dropping out of the labour force.

"I know the market wants to rally on this number but remember we need a minimum of 250,000 just to cover demographic change."

The figures add to a range of data pointing to a gradual US economic recovery.

On Friday, the US Institute for Supply Management said its services index rose to 56.8 last month from a revised 53.0 in December. It was the highest level since February 2011.

The new orders index climbed to 59.4 from 54.6 while employment in the vast services sector was also strong, rising to the highest level in six years at 57.4 from 49.8.

Last week, it was announced that the US economy expanded at a 2.8% annual pace in the October-December quarter, a full percentage point higher than in the previous quarter.

Earlier this week, a survey from the Institute for Supply Management (ISM) indicated that the US manufacturing sector expanded at its fastest pace in seven months in January.

Unemployment and economic recovery has been a dominant issue in the campaign for November's US presidential elections.

Although the downward trend in joblessness augurs well for Barack Obama's prospects of a second term, he is still likely to face more voters out of work than any post-war president.

When Ronald Reagan won re-election in a landslide victory in 1984, joblessness in the US stood at 7.5%.

In 1932, in the midst of the Great Depression, Herbert Hoover was voted out of office in a year when unemployment was at 23.6%.

His successor, Franklin Roosevelt, faced joblessness rates of 16.9% in 1936 and 14.6% when he was re-elected four years later, according to data from the US Bureau of Labor Statistics.

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