The US economy experienced job losses for the first time since 2003, the US labour department reported on Friday, with non-farm payrolls falling by 17,000 jobs in January against a backdrop of heightened recession fears.
The figure was well below the expectations of most economists, who were on average predicting a gain of about 70,000 jobs. The number of jobs in the construction, manufacturing and government sectors declined, while it rose slightly in services and retailing. The US unemployment rate dipped from its latest reading of 5 per cent in December to 4.9 per cent in January, according to a separate survey of households.
The disappointing report could tilt economists' reading of the US labour market towards the belief that it is weakening significantly, after a series of mixed signals over the course of this week.
"The incoming data continues to show the economy slowing sharply," said Nigel Gault, US economist at Global Insight. "Whether it is just stalled or heading into recession isn't yet clear. But we should expect to see more bad news on the labour market - at least through the middle of the year - before the heavy doses of monetary and fiscal stimulus begin to kick in."
However, later in the day the ISM manufacturing index, which measures US factory activity, posted an unexpected rise to 50.7 in January, signalling an expansion, from 48.4 in December, which is consistent with a contraction. This helped alleviate the effects of the poor jobs data.
Overall, the US economy grew at an unexpectedly slow rate of 0.6 per cent in the fourth quarter of 2007, increasing concerns that it could slide into recession in the first half of 2008.
In an effort to avert a recession, the Federal Reserve on Wednesday cut interest rates by 50 basis points - on top of its 75 basis point emergency easing of monetary policy last week. Meanwhile, the Bush administration and Congress are working to enact a $150bn package to stimulate the economy through rebate cheques for consumers and investment incentives for businesses.
Labour market indicators had been mixed this week. On Wednesday, ADP, the payroll services group, released its monthly report on new private sector jobs, showing an increase of 130,000 jobs in January on a seasonally adjusted basis, compared with expectations of a 40,000 increase.
But on Thursday, the commerce department's weekly jobs report painted a different picture, with the number of workers who filed for unemployment benefits rising sharply, by 71,000 jobs, to 375,000, or the most since Hurricane Katrina hit in September 2005.
On Friday, the labour department made revisions to its non-farm payroll figures for previous months, with fewer jobs created in November and more in December, but little change on a cumulative basis. Average hourly earnings rose 0.2 per cent in January, slightly less than expectations, while the average work week fell to 33.7 hours in January from 33.8 in December.
