The U.S. generated 157,000 jobs in January, just short of analysts’ estimates and another sign that economic momentum is stagnating. The headline unemployment rate inched higher to 7.9% from 7.8% a month ago.
The data adds fuel to a growing feeling that the recovery from the deep recession that followed the financial crisis of 2007 and 2008 has hit a snag.
On Wednesday the Commerce Department said the U.S. economy shrank at an annual rate of 0.1% during the fourth quarter of 2012, the first quarterly drop since 2009.
Following that announcement the Federal Reserve acknowledged what the data was already saying – the Fed issued a statement saying economic growth seemed to have slowed down late in 2012.
Analysts said while not great, the numbers indicate the U.S. isn’t slipping back into recession.
“A solid gain in US employment provides welcome reassurance that the US economy is healthier than the surprise fall in fourth quarter GDP indicated and is not at risk of a renewed recession. However, policymakers will no doubt remain unimpressed at the pace of the job market recovery, suggesting there is no end is in sight for Fed stimulus,” said Chris Williamson, chief economist at research firm Markit.
Stock markets were poised to move higher as some positive global economic news from China and Europe apparently took precedence over the less-than-stellar U.S. jobs report.
Analysts had forecast an increase of 160,000 non-farm jobs in January. Some had predicted an upside surprise in the following the resolution of the fiscal cliff crisis at the beginning of the year which staved off broad tax increases and massive, across-the-board budget cuts.
But that wasn’t the case. Job creation remained essentially in the same range it’s been stuck for months, which might accurately be described as neutral. Enough to pull the unemployment rate down a bit but not enough to impact downbeat consumer sentiment or motivate potential home buyers.
The good news out of Friday’s jobs report was a couple of significant upward revisions to recent monthly reports. The December figure was revised higher to 196,000 from 155,000, and the November number was revised to 247,000 from 161,000.
Still the unemployment rate is at its lowest point since the financial crisis struck in 2008, shutting down credit markets and wiping out nearly 8 million U.S. jobs. The recovery from that downturn has been a crawl.
Some other positive aspects from the January jobs report included an increase in hourly earnings and healthy gains in construction and retail employment.
The Fed has essentially tied fiscal policy to job growth, saying it will continue its bond buying programs and keep interest rates at historically low rates until unemployment falls to 6.5%.
The Fed, with a balance sheet now expanded beyond $3 trillion, believes low interest rates will spur economic activity, in particular in the housing sector. If Americans start to buy homes the domino effect will spread into an array of sectors including construction, retail and financial services, the theory goes.