Instant View: Payrolls fall in January, 20,000 jobs cut

NEW YORK (Reuters) - Employers unexpectedly cut 20,000 jobs in January, but the unemployment rate surprisingly fell to a five-month low of 9.7 percent, suggesting some labor market improvement starting to take root.

KEY POINTS: * The Labor Department said the economy shed 150,000 jobs in December, compared to 85,000 previously reported, but November was revised to a gain of 64,000, up from 4,000. Annual benchmark revisions to payrolls data showed the economy has purged 8.4 million jobs since the start of the recession in December 2007. * Analysts polled by Reuters had forecast payrolls gaining 5,000 and the unemployment rate to edge up to 10.1 percent in January from 10 percent. Median estimates from the top 20 forecasters expected payrolls to be unchanged last month. * A sharp increase in the number of people giving up looking for work helped to depress the jobless rate. The number of 'discouraged job seekers' rose to 1.1 million in January from 734,000 a year ago.

COMMENTS:

GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST

LOUIS, MISSOURI:

"It's disappointing. Payroll jobs were down again. Unemployment dipped below 10 percent which is positive. The breakdown of numbers still shows weakness in construction, but there was job growth in manufacturing. That is consistent with some of the other manufacturing reports we've recently seen suggesting manufacturing has turned up. Private sector temporary help continued to increase, suggesting there will be some job growth down the road."

KEVIN FLANAGAN, CHIEF FIXED INCOME STRATEGIST, MORGAN STANLEY

SMITH BARNEY, PURCHASE, NEW YORK:

"You get a mixed bag here. The payrolls survey part of the report is weaker than expected, but when you look at the household survey things don't look as bad.

"You do see the jobless rate dropping to 9.7 percent but in terms of payrolls we are still in the negative column.

"The Treasury market isn't really rallying on this. I am not sure it is adding any new economic information."

BRUCE BITTLES, CHIEF INVESTMENT STRATEGIST, ROBERT W. BAIRD &

CO, NASHVILLE:

"The loss of 20,000 jobs is not as positive as consensus had hoped, but the fact that the unemployment rate fell to 9.7 percent may be construed as a positive. However, I suspect that that was due to so many people leaving the work force, so that number may be less bullish than it appears.

"It's obvious we're in a recovery that's uneven and not producing any jobs. That's a negative for the economy going forward. It's hard to say with any real degree of conviction that we're out of the recession."

MARKET REACTION: STOCKS: U.S. stock index futures extended declines. BONDS: U.S. Treasury debt prices added to gains. DOLLAR: U.S. dollar pared gains against the yen.