by Frank James
The job loss numbers for January were, put simply, somewhat shocking.
Economists had expected a mediocre 70,000 increase in payrolls. Instead, January’s payrolls fell by 17,000 as the Labor Department reported this morning. It was the first such job loss since 2003.
Economists generally believe the economy should add about 150,000 jobs a month just to have enough jobs for the growing workforce. So even the expected 70,000 was less than half of the jobs required. That payrolls fell by 17,000 was simply abysmal.
The decline would seem to serve as further vindication of Federal Reserve Chair Ben Bernanke. After cutting the key, federal-funds interest rate by a combined one and a quarter percentage points, in two actions since early last week, the Fed has been criticized by some for moving too aggressively and seeming almost panicky.
Some Republican members of Congress have also expressed concern that the interest-rate cuts could cause inflation to rise to troublesome levels.
But the Fed has two main tasks under federal law: maintaining price stability and keeping the economy as close to full employment as possible. With with an obviously contracting job market, at least in January, and the Fed expecting inflation pressures to moderate, the central bank has some more ammunition to use against critics.
According to the Labor Department, the job losses were fairly widespread. Employment in the construction, manufacturing and professional services were all down though health-care added jobs.
Here’s part of the Labor Department report:
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In January, total nonfarm payroll employment was about unchanged (-17,000), after
edging up in November (60,000) and December (82,000). In 2007, payroll employment
increased by an average of 95,000 jobs per month. Both construction and manufac-
turing employment continued to decline in January, and health care employment rose.
(See table B-1.)
Construction employment decreased by 27,000 in January and has fallen by 284,000
since its peak in September 2006. Over-the-month job losses occurred in residential
building (-10,000) and residential specialty trade contractors (-18,000).
Manufacturing lost 28,000 jobs in January. Over the month, small declines occurred
among many durable and nondurable goods industries. Manufacturing has lost 269,000
jobs over the past 12 months.
In the service-providing sector, health care employment continued to grow in
January (27,000), about in line with average monthly gains over the prior 12 months.
Within health care, over-the-month job gains occurred in ambulatory health care ser-
vices (14,000), which includes offices of physicians, and in hospitals (10,000).
Food services employment continued to trend upward in January. From November
through January, food services added an average of 16,000 jobs per month, compared
with an average gain of 28,000 jobs for the 12-month period ending in October.
Employment in professional and technical services was little changed in January
following a large increase (49,000) in the prior month. In 2007, job growth in this
sector totaled 335,000.
In January, employment in financial activities was about unchanged as commercial
banking lost 4,000 jobs, and securities, commodity contracts, and investments added
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5,000 jobs. Since reaching a peak in December 2006, employment in financial activi-
ties has declined by 99,000.
In January, employment in both wholesale and retail trade was little changed.
Within retail trade, employment in food and beverage stores was up by 12,000 over
the month.
The weaker jobs reports gives Democratic presidential candidates another chance to bash President Bush for his stewardship of the economy.
It also raises the pressure on Sen. John McCain, the apparent frontrunner for the Republican nomination who has made his reputation on national security, fighting pork and campaign finance but not the economy, to come up with a more compelling argument than he’s delivered so far about why he’s just the right man to rescue the economy.