The US unemployment rate fell unexpectedly in January for the first time in eight months, the US government said today, but the decline was chiefly due to a fall in the workforce.
The US Labor Department said the jobless rate declined to 5.6 percent from its six-year high of 5.8 percent hit in December. US economists had projected the rate to rise to 5.9 percent.
Meanwhile, the number of workers on payrolls outside the farm sector decreased by 89,000 in January after a 130,000 drop in December. The December figure was originally reported as a slightly milder 124,000 job loss.
However, a shrinkage of nearly one million in the number of workers who are considered to be in the workforce was the main reason behind the decline in the jobless rate even as the economy lost jobs.
The job market is expected to stay soft for a period even amid an economy analysts increasingly believe appears poised for a recovery from a recession that began in March.
Although the lower unemployment rate was good news, the payroll drop was steeper than the 27,000 fall projected by US economists in a Reuterssurvey. In another sign that the job market remains weak, the average workweek shrank for employees both at private companies overall and in the factory sector.
It is certainly a mixed bag. I would regard the headline payroll number as a bit of a disappointment, but I don't think it changes the broader picture that the worst for the economy is over and that we are slowly turning the corner, said Mr Doug Porter, economist at BMO Nesbitt Burns in Toronto.
In a clearly encouraging sign, the 89,000 payroll reduction was far lower than the hemorrhaging of workers that occurred in the final three months of 2001 when the economy was hit by the September 11th attacks that battered consumer and business confidence. During the fourth quarter of last year, monthly job losses averaged 311,000, according to the Labor Department.
The last time the unemployment rate fell was in May 2001, when it dropped to 4.4 percent from April's 4.5 percent.
Retail was one of the few industries in January where jobs were created. It saw the addition of 62,000 positions. But the factory sector lost 89,000 jobs and construction payrolls dropped by 54,000.
Average hourly earnings stayed flat in January at $14.59. They had been expected to gain 0.2 percent.