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Unemployment Rate Falls Amid Economic Optimism

Posted on: Saturday, 4 February 2006, 18:00 CST

Unemployment rate falls amid economic optimism

WASHINGTON The nations unemployment rate dropped to a 4-year low as businesses cranked up hiring in January, an encouraging sign that the economy started the year on the right foot.

The latest jobs picture, provided by the Labor Department on Friday, suggests that companies are feeling better about the economys prospects as well as their own and thus are more inclined to hire. Good weather in parts of the country also helped, especially for construction work.

The January upswing in job creation signaled that the economy was off to a good start this year, but the strength stoked investor fears on Wall Street about higher interest rates after the Federal Reserve gave no indication that Tuesdays 14th consecutive increase would be the last.

At the close of trading Friday, the Dow Jones industrial average fell 58.36, or 0.54 percent, to 10,793.62. Inflation worries sent the Dow down 101 points Thursday. Broader stock indicators also fell. The Standard & Poors 500 index sank 6.81, or 0.54 percent, to 1,264.03, and the Nasdaq composite index dropped 18.99, or 0.83 percent, to 2,262.58. For the week, the Dow sank 1.04 percent, the S&P 500 declined 1.53 percent and the Nasdaq was 1.81 percent lower.

While the 193,000 jobs added last month came in below economists 250,000-job estimate, upward revisions to Novembers and Decembers figures compensated for that shortfall, said Jack Caffrey, equities strategist for JPMorgan Private Bank.

Coupled with a spike in unit labor costs reported by the Labor Department Thursday meaning companies are paying more for less productive workers the increased hiring was evidence of a growing economy and puts back on the table that the Fed may not be done (lifting rates) in March, Caffrey said.

Wall Streets mood was muted further by a drop in the University of Michigans consumer sentiment index, which slid 2.2 points to 91.2. Economists had predicted a slight decrease to 93.1.

Investors also mulled data from the Institute for Supply Management, which on Friday said the nations service sector grew again last month but at a slower pace than in December.

The unemployment rate dropped from 4.9 percent to 4.7 percent, the lowest since July 2001.

For black people, the rate fell to 8.9 percent, the best since September 2001. The unemployment rate for Hispanics dipped to a five- month low of 5.8 percent.

The economy fired on all cylinders in January, said economist Sung Won Sohn, president of Hanmi Bank.

Employment gains were fairly widespread last month. Construction, manufacturing, health care, financial activities and other industries boosted payrolls. That blunted job losses in other areas including retailing, government and broadcasting.

Theres no question were getting back to better days for job creation, said Ken Mayland, economist at ClearView Economics. Theres been a sense of unease in the American workplace and this should help relieve that.

Source: Advocate; Baton Rouge, La.

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