The U.S. unemployment rate
unexpectedly dropped to 5.7 percent in January, the lowest in four
months. Companies added workers for the first time since October
as demand for goods and services began to accelerate.
“This number is encouraging,” said Alfred Broaddus,
president of the Federal Reserve Bank of Richmond, in an
interview. “To get a solid, ongoing business expansion you have
to have stronger growth in employment.”.
The jobless rate fell from an eight-year high of 6 percent in
December and companies added 143,000 payroll jobs, the most in
more than two years. The jobs increase follows a loss of 156,000
in December, more than the government had estimated last month..
“It’s too soon to call it a rebound in hiring, but things
are stabilizing,” said Diane Swonk, chief economist of Bank One
Corp. in Chicago..
Companies including Microsoft Corp. and International
Business Machines Corp. are hiring more salespeople as demand
starts to improve. Adding jobs may boost the consumer spending
that accounts for two-thirds of the economy. The U.S. economy may
expand 2.8 percent this year after 2.4 percent growth in 2002,
based on the average Blue Chip Indicators Survey forecast..
None of the 65 economists in a Bloomberg News survey had
forecast an unemployment rate lower than 5.9 percent. The median
forecasts were for a 6 percent rate and 68,000 new jobs after a
previously reported decrease of 101,000 in December..
The Rate Debate.
Economists are debating whether the unexpected decrease in
the jobless rate truly reflects an improving labor market. John
Ryding, chief market economist at Bear, Stearns & Co. in New York,
said the decline “suggests that the labor market may not be as
weak as we thought.”.
Others aren’t so sure. The unemployment rate will probably
rise in coming months, according to David Greenlaw, an economist
at Morgan Stanley in New York. The economy needs payroll gains of
125,000 or more month after month to “bring about a sustained
decline in the unemployment rate,” he said. Greenlaw had forecast
a 6 percent rate, while Ryding predicted 6.1 percent..
A possible war with Iraq may raise concerns that demand will
stumble and delay hiring, economists said..
“Firms will not start gearing up until the war situation is
resolved,” said Joel Naroff, president of Naroff Economic
Advisors in Holland, Pennsylvania. “Going into any war, we have
some strength to lean on. It is how we come out of it that
matters.”
