* U.S. nonfarm payrolls show surprise 20,000 fall in Jan
* Revisions reveal deeper losses than previously thought
* Unemployment rate, at 9.7 pct, is lowest in five months
(Adds consumer credit, fresh Obama quote, Fed poll)
By Lucia Mutikani
WASHINGTON, Feb 5 The U.S. unemployment rate
surprisingly fell to a five-month low in January and factory
payrolls grew for the first time since 2007, hinting at a labor
market recovery even though the economy lost 20,000 jobs.
President Barack Obama cautiously welcomed the figures but
said more needed to be done to put people back to work. Obama
and his fellow Democrats fear voters could punish them in
November congressional elections if headway is not made in
The decline in payrolls reported by the Labor Department on
Friday was far smaller than the 150,000 drop posted in
December. November's data from the survey of employers was
revised sharply higher to a gain of 64,000, up from 4,000.
The jobless rate, based on a separate household survey,
fell to 9.7 percent from 10 percent in December. That survey
found employment rising, with the size of the labor force
roughly flat. Analysts had expected payrolls to rise by 5,000
and the unemployment rate to edge up to 10.1 percent.
"The wheels of the economy are turning. The improvement in
the employment data does match the increase in GDP the last two
quarters so it's not a fluke. The economic recovery looks much
more sustainable today," said Chris Rupkey, senior financial
economist at Bank of Tokyo/Mitsubishi UFJ in New York,
referring to economic growth data for the fourth quarter 2009.
Details of the report were relatively upbeat. The length of
the average workweek hit its highest in a year and overtime
paid in manufacturing was the most since September 2008,
suggesting growing pressure to add to payrolls.
Some analysts, however, were skeptical of the drop in the
jobless rate and believed it would head higher again. The
pickup in factory employment helped to lift U.S. stocks,
despite lingering worries about European fiscal problems.
U.S. government debt prices rose and the U.S. dollar hit an
8-1/2 month high versus the euro, tapping flight-to-quality
trades from the troubles in Europe.
Annual revisions to the payrolls data showed job losses
since the recession began were much deeper than originally
thought. The economy has lost 8.4 million jobs since the start
of the recession in December 2007, compared to 7.2 million
before the revisions.
In January, the number of 'discouraged job seekers' stood
at 1.1 million, up from 734,000 a year ago. Last month, 6.3
million people had been out of work of more than 27 weeks.
With Americans increasingly anxious about persistent high
unemployment, Obama has declared that job creation will be his
top priority in 2010. Announcing plans on Friday to expand
credit for small businesses, Obama said the employment report
was cause for hope but not celebration.
"Understanding that these numbers will continue to
fluctuate for months to come, these are welcome, if modest
signs of progress along the road to recovery," Obama said. For
details see [ID:nN05116615]
Financial markets have grown nervous about the prospect of
unemployment in the United States remaining high for a long
time. The economy resumed growth in the second half of 2009,
but a labor market recovery has yet to materialize.
Labor market weakness is causing households to remain wary
of taking on new debt, with total consumer credit declining by
$1.73 billion in December, a Federal Reserve report showed.
While the U.S. economy is growing, recovery hopes in
Germany were dealt a set back by a sharp drop in industrial
output in December. For details see [ID:nLDE614128]
A survey of banks that do business with the Fed predicted
the U.S. central bank will start raising interest rates in the
fourth quarter of this year as the labor market mends.
Analysts expect U.S. payrolls to start growing in February
as the government steps up temporary hiring for the 2010
"This hiring will continue to push the unemployment rate
lower and then once the need for these workers is finished they
will be fired and the unemployment rate will drift back up to
the 10 percent area," said Brian Fabbri, chief North America
economist at BNP Paribas in New York.
Last month, the services sector added 40,000 jobs after
shedding 96,000 positions in December. The figure included a
rise in federal government employment, partly a result of early
hiring for the census.
In another positive trend, temporary help employment rose
again last month, while manufacturing payrolls increased
11,000, the first gain since January 2007. Manufacturing
employment had dropped 23,000 in December.
But the construction sector continued to struggle, losing
75,000 jobs, likely because of unusually cold weather.
Construction payrolls fell 32,000 in December.
In another sign of labor market improvement, the average
workweek unexpectedly edged up to 33.3 hours, the highest in a
year, from 33.2 in December, while manufacturing overtime rose
to 3.5 hours, the highest since September 2008.
"This suggests that firms are straining to keep up with
rising demand without hiring. We believe that as long as orders
keep streaming in, at some point soon firms are going to have
to give in and add workers," said Stephen Stanley, chief
economist at RBS in Stamford, Connecticut.
For graphic on earnings and the workweek see:
For graphic on benchmark revisions see:
(Additional reporting by the White House team)