Payrolls Jump Casts Doubt on Fed Rate Pledge
By Bob Willis
Feb 3, 2012
The U.S. jobless rate unexpectedly fell in January to the lowest in three years as payrolls climbed more than forecast, casting doubt on the Federal Reserve’s plan to keep interest rates low until late 2014.
The unemployment rate dropped to 8.3 percent, the lowest since February 2009, Labor Department figures showed today in Washington. The 243,000 increase in jobs was the biggest in nine months and exceeded the most optimistic forecast in a Bloomberg News survey. Service industries grew by the most in a year, according to a separate report.
“We’ve reached an important threshold here,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The recovery is for real.”
Stocks and bond yields jumped on optimism the economy will weather the European debt crisis as an improving labor market fuels household spending. The data, which showed gains from factories to retailers, may boost President Barack Obama’s re- election bid and come a week after Fed Chairman Ben S. Bernanke said unemployment would be slow to decline.
The Standard & Poor’s 500 Index rose 1.4 percent to 1,344.0 at 12:45 p.m. in New York, extending the best start to the year since 1989. The yield on the benchmark 10-year Treasury note climbed to 1.94 percent from 1.82 percent late yesterday.
Survey of Economists
The median projection in the Bloomberg survey called for payrolls to rise by 140,000. Estimates of the 89 economists ranged from increases of 95,000 to 225,000. Revisions added a total of 60,000 jobs to payrolls in November and December.
“The payroll gains we’re seeing in this report are consistent with significant improvement in consumer spending,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “If we hold at these levels, it will change a lot of expectations for economic growth, the labor market recovery, inflation and the Fed’s policy response.”
Sustained increases of around 200,000 jobs a month are needed to bring the unemployment rate down one percentage point over a year, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
Obama used today’s report to push lawmakers for an extension of the payroll-tax cut for workers and unemployment benefits.
“The recovery is speeding up,” Obama said at a fire station in Arlington, Virginia. “And we’ve got to do everything in our power to keep it going.” ,,,
Gains in U.S. employment last month were broad-based, including manufacturing, construction, temporary help agencies, accounting firms, restaurants and retailers...
The unemployment rate, derived from a separate survey of households, was forecast to stay at 8.5 percent, according to the survey median. The drop in the jobless rate reflected a 381,000 decrease in unemployment at the same time 250,000 Americans entered the labor force.
Private payrolls, which exclude government agencies, rose 257,000 in January after a revised gain of 220,000 the prior month, marking the biggest back-to-back gain since March-April. It was projected to climb by 160,000.
Employment at service-providers increased 162,000, the most in four months, reflecting faster job gains in retail, transportation and leisure and hospitality...
The number of unemployed Americans dropped to 12.8 million, the lowest since January 2009, from 13.1 million in December.
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http://www.bloomberg.com/news/2012-02-03/payrolls-in-u-s-jumped-243-000-in-january-unemployment-rate-drops-to-8-3-.html
