U.S. Jobless Rate Falls to 8.3 Percent, a 3-Year Low

By MOTOKO RICH

Published: February 3, 2012 - New York Times

The United States economy gained momentum in January, as employers added 243,000 jobs, the second straight month of better-than-expected gains.

And in a separate measure, the unemployment rate fell to 8.3 percent, giving a cause for optimism as the economy shapes up as the central issue in the presidential election.

Measured by both the unemployment rate and the number of jobless — which fell to 12.8 million — it was the strongest signal yet that an economic recovery was spreading to the jobs market. The last time the figures were as good was February 2009, President Obama’s first full month in office.

The report sent stocks up by over 1 percent in trading on Wall Street.

The White House used the new numbers as a platform to appeal for an extension of the payroll tax cut and unemployment benefits. President Obama, speaking at a Washington-area firehouse to promote a jobs initiative for veterans, warned that more help was needed and called on Congress to aid with the economic recovery.

“These numbers will go up and down in the coming months, and there’s still far too many Americans who need a job or a job that pays better than the one they have now,” he said. “But the economy is growing stronger, the recovery is speeding up, and we have got to do everything in our power to keep it going.”

From the Republican side of the aisle, the House majority leader, Eric Cantor, welcomed the “encouraging” numbers but said there was still a need for “bold, pro-growth policies that reduce red tape and will help our nation’s small businesses to succeed, expand and create new jobs.” The House speaker, John Boehner, called for a “new approach” to replace “the same policies that simply haven’t worked as advertised.”

The job growth followed a December gain that was revised Friday to 203,000, from the original 200,000.

The private sector remained the engine of new job gains. While federal agencies and local governments continued to lay off workers, private-sector employers added 257,000 net new jobs in January. The industries with the biggest gains were manufacturing, professional and business services, and leisure and hospitality.

The promising numbers came as various economic indicators have painted an ambiguous picture of the recovery’s strength.

Layoffs appear to be slowing as fewer people are filing claims for unemployment benefits, and factory orders have picked up.

But while sales of existing homes have started to rise, home prices continue to fall. Consumer spending is still restrained, and could come under further pressure with gas prices edging higher over the last four months and as consumers revert to building up savings.

Economists were encouraged by the strong numbers for January and broad-based increases in private sector employment. Seasonal factors may have affected some industries, like restaurants or construction, that showed strong hiring numbers in January.

Nevertheless, said Steve Blitz, senior economist for ITG Investment Research, the report exhibited strong gains in both manufacturing and related job categories, like transportation and warehousing and wholesale trade.

“You’ve got to give credit when things are moving in the right direction,” said Mr. Blitz, who has been cautious in his assessment of the recovery. “This is not a process that is going to be done in a month or two months or a year. It could take five or 10 years to get there, but what you’re going to continue to see is what is inside this report, which is the manufacturing sector is improving.”

Others were not convinced that job growth would be sustained at this high level.

“The problem is that there is this bifurcation here in the numbers,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “On the one hand we see rather impressive job growth, but on the other hand we’re also seeing other economic indicators that are telling us that the economy is fundamentally weak.” Mr. Baumohl cited moderate consumer spending and an overall economic growth rate that typically does not support this level of hiring.

The strong job numbers certainly belied the much gloomier picture of the economy painted by the Federal Reserve last month, when it declared it would extend plans to hold down short-term interest rates near zero through the end of 2014. In its statement, the Fed described weak hiring, a depressed housing market and continuing concerns in Europe.