By Bob Willis - Feb 3, 2012 11:22 PM GMT+0700
Feb. 3 (Bloomberg) -- John Silvia, chief economist at Wells Fargo Securities LLC, talks about the January U.S. jobs report, Federal Reserve policy and outlook for the U.S. economy. Employment climbed more than forecast in January and the U.S. jobless rate unexpectedly fell to the lowest in three years. He speaks with Betty Liu on Bloomberg Television's "In the Loop." Bloomberg's Peter Cook, Michael McKee and Dominic Chu also speak. (Source: Bloomberg)
Feb. 3 (Bloomberg) -- Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., talks about the January U.S. jobs report and outlook for the global economy. Employment climbed more than forecast in January and the U.S. jobless rate unexpectedly fell to the lowest in three years. El-Erian, speaking with Betty Liu, Scarlet Fu and Dominic Chu on Bloomberg Television's "In the Loop," also talks about Federal Reserve policy. (Source: Bloomberg)
Feb. 3 (Bloomberg) -- U.S. Secretary of Labor Hilda Solis discusses the January employment report and outlook for an agreement to extend the payroll tax cut. Solis speaks with Betty Liu and Peter Cook on Bloomberg Television's "In the Loop." (Source: Bloomberg)
The U.S. jobless rate unexpectedly fell in January to the lowest in three years as payrolls climbed more than forecast, casting doubt on the Federal Reserve’s plan to keep interest rates low until late 2014.
The unemployment rate dropped to 8.3 percent, the lowest since February 2009. The 243,000 increase in jobs was the biggest in nine months and exceeded all forecasts in a Bloomberg News survey, Labor Department figures showed today in Washington. Service industries grew by the most in a year, according to a separate report.
Stocks and bond yields jumped on optimism the economy will weather the European debt crisis as an improving labor market fuels household spending. The data, which showed gains from factories to retailers, may boost President Barack Obama’s re- election bid and come a week after Fed Chairman Ben S. Bernanke said unemployment would be slow to decline.
“The payroll gains we’re seeing in this report are consistent with significant improvement in consumer spending,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “If we hold at these levels, it will change a lot of expectations for economic growth, the labor market recovery, inflation and the Fed’s policy response.”
The Standard & Poor’s 500 Index rose 1.2 percent to 1,341.66 at 11:20 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 1.93 percent from 1.82 percent late yesterday.
The median projection in the Bloomberg survey called for payrolls to rise by 140,000. Estimates of the 89 economists ranged from increases of 95,000 to 225,000. Revisions added a total of 60,000 jobs to payrolls in November and December.
White House
The White House used the jobs report to bolster its argument for extensions of a payroll tax cut and unemployment benefits.
“It is critical that we continue the economic policies that are helping us to dig our way out of the deep hole that was caused by the recession that began at the end of 2007,” Alan Krueger, chairman of the White House Council of Economic Advisers, said in a statement.
Elsewhere, European retail sales unexpectedly declined in December, led by Germany and France, as unemployment at a 14- year high and government spending cuts sapped consumer demand.
Gains in employment last month were broad-based, including manufacturing, construction, temporary help agencies, accounting firms, restaurants and retailers.
Employment, overtime and hours worked in factories increased as manufacturers, who have been leading the two-year recovery, boosted production to rebuild inventories and meet global demand for their goods.
Longer Workweek
Assembly-line workers put in an average 41.9 hours of work each week, the most since January 1998, while overtime hours climbed to the highest since March 2007. Manufacturing payrolls increased by 50,000 in January, the most in a year.
Peoria, Illinois-based Caterpillar Inc. (CAT), the world’s biggest maker of earthmoving equipment, plans to hire more workers this year as it expands facilities, including in Victoria, Texas, and Winston-Salem, North Carolina, Chief Financial Officer Edward Rapp said yesterday.
“Those are the things that will lead to employment growth here,” Rapp said in an interview with Betty Liu on Bloomberg Television’s “In the Loop.”
The unemployment rate, derived from a separate survey of households, was forecast to hold at 8.5 percent, according to the survey median. The drop in the jobless rate reflected a 381,000 decrease in unemployment at the same time 250,000 Americans entered the labor force.
Private Payrolls
Private payrolls, which exclude government agencies, rose 257,000 in January after a revised gain of 220,000 the prior month, marking the biggest back-to-back gain since March-April. It was projected to climb by 160,000.
Employment at service-providers increased 162,000, the most in four months and reflecting faster job gains in retail, transportation and leisure and hospitality.
Tibco Software Inc. (TIBX) plans to hire 500 people in the U.S. this year as the economy improves and Europe works out its debt crisis, Vivek Ranadive, chief executive officer of the Palo Alto, California-based company said in an interview.
“We are hiring quite rapidly now, all in sales and service,” Ranadive said last week at the World Economic Forum’s annual conference in Davos, Switzerland. “It’s a good time to hire.”
Service Providers
The Institute for Supply Management’s index of non- manufacturing industries, which account for almost 90 percent of the economy, rose to 56.8 in January from 53 a month earlier. The Tempe, Arizona-based group’s measure was projected to climb to 53.2, according to the median forecast in a Bloomberg survey of economists. Readings above 50 signal growth.
Construction companies added 21,000 workers last month. The number of people unable to go to work because of bad weather, a proxy for the climate’s effect on the labor market, was 206,000 last month, less than half the 424,000 average for the month since 1976. The shortfall signals favorable conditions may have played a role in the gain in employment, according to economists like Neil Dutta at Bank of America Corp. in New York.
Government payrolls decreased by 14,000 in January, reflecting cuts at the federal and local levels.
Average hourly earnings rose 0.2 percent to $23.29, today’s report showed. The average work week for all workers held at 34.5 hours.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.1 percent from 15.2 percent.
Fed Meeting
The Fed said on Jan. 25 after a two-day meeting that it would keep its benchmark lending rate low “at least” until late 2014 from a prior target of mid-2013.
Bernanke, speaking at a news conference after the meeting, said that the option of a third round of large-scale bond purchases, known as quantitative easing, is still “on the table.”
“We still have a long way to go before the labor market can be said to be operating normally,” Bernanke told the House Budget Committee in Washington yesterday.
Today’s report may change the Fed’s thinking, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “The report definitely scales down the odds for QE3, particularly the drop in the unemployment rate,” Feroli said. “There is strength in the labor market.”
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net
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