* Nonfarm employment surges 243,000 in January
* Unemployment rate falls to 8.3 percent from 8.5 percent
* Jobs gains widespread in show of strength
* Markets dial back expectations of more Fed stimulus
By Lucia Mutikani
WASHINGTON, Feb 3 The United States
created jobs at the fastest pace in nine months in January and
the unemployment rate unexpectedly dropped to a near three-year
low, giving a boost to President Barack Obama.
Nonfarm payrolls jumped 243,000, the Labor Department said
on Friday, as factory jobs grew by the most in a year. The
jobless rate fell to 8.3 percent - the lowest since February
2009 - from 8.5 percent in December.
The gain in employment was the largest since April and it
far outstripped the 150,000 predicted in a Reuters poll of
economists. It hinted at underlying economic strength and
lessened chances of further stimulus from the Federal Reserve.
"More pistons in the economic engine have begun to fire,
pointing to accelerating economic growth. One of the happiest
persons reading this job report is President Obama," said Sung
Won Sohn, an economics professor at California State University
The payroll gains were widespread - from retail to temporary
help, and from construction to manufacturing - an indication the
recovery was becoming more durable.
A survey of households showed the unemployment rate declined
even as new job seekers flooded into the labor force. Economists
had expected the jobless rate, which has now fallen 0.8
percentage point since August, to hold steady.
"I think this is a sign that maybe the economy is reaching
that holy grail of a self-sustaining economic expansion," Stuart
Hoffman, chief economist at PNC Financial Services in
Pittsburgh, told Reuters Insider.
The outlook was further brightened by a separate report
showing service sector activity quickened last month to a near
one-year high. A gauge of service sector employment touched a
The fairly upbeat data buoyed stocks on Wall Street, with
the tech-heavy Nasdaq Composite index hitting an 11-year
high. The Dow Jones industrial average rose to a near
four year high, while the Standard & Poor's index
extended its 2012 advance to about 7 percent.
U.S. Treasury debt prices tumbled as investors dialed back
expectations on Fed easing. The dollar was little changed
against a basket of currencies after rising earlier in the
The employment report contrasted with a fairly glum
assessment of the economy offered by the Fed last week.
Officials at the central bank have been debating whether to
buy more bonds - a program dubbed QE3 - to drive interest rates
lower. It also raised doubts about the Fed's expectation that it
could hold interest rates near zero at least through late 2014.
"At the very least this scales back QE3 (quantitative
easing) odds. The surprisingly persistent decline in the
unemployment rate also calls into question how firmly wedded the
Fed is to the late-2014 rate guidance," said Michael Feroli, an
economist at JPMorgan in New York.
Interest rate futures indicated that at least some traders
were beginning to lay bets the Fed could move interest rates up
in early 2014.
Fed fund futures were pricing in a 38 percent chance of a
January 2014 rate hike, up from 29 percent before the report,
and the first better than even chance of a rate hike was in
April 2014, according to CME Group, where the contracts are
However, economists at most leading Wall Street firms still
believe the Fed will undertake another bond-buying program,
according to a Reuters poll.
DON'T MUCK IT UP
Obama welcomed the strong jobs report and urged Congress to
extend a payroll tax cut and benefits for long-term unemployed,
which expire at the end of this month.
"Now is not is not the time for self-inflicted wounds to our
economy. I want to send a clear message for Congress. Do not
slow down the recovery that we are on, don't muck it up," he
said at a firehouse in Arlington, Virginia.
Republicans acknowledged the improvement in the labor
market, but said the jobless rate was still too high.
"Our economy still isn't creating jobs the way it should be
and that's why we need a new approach," said House Speaker John
While employment growth has quickened there are no jobs for
three out of every four unemployed people and 23.8 million
Americans are either out of work or underemployed. The level of
employment is still 5.57 million from its pre-recession level.
But steady progress is being made. The economy added 60,000
more jobs in November and December than previously reported.
In addition, average hourly earnings rose four cents, which
should help to support spending. The report suggested that
expectations of a slowdown in U.S. economic growth in the first
quarter were not yet impacting on companies' hiring decisions.
Employment in the private sector surged 257,000 - the
largest gain since April. Government payrolls fell 14,000, the
least since September.
U.S. economic growth accelerated to a 2.8 percent annual
rate in the final three months of 2011, but it was widely
expected to slow as businesses ease back on efforts to rebuild
inventories and exports slip amid a likely recession in Europe.
Some economists cautioned that January's jobs figures could
overstate the pulse of the recovery, citing still lackluster
consumer confidence, income and spending growth.
While some said the jobless rate could drop below 8 percent
by year end, others warned it would likely move up in the
near-term as people who had given up the search for a job
re-enter the workforce.
"For this to mark an upturn in the labor market, then
businesses will have to continue to hire on this scale
throughout the winter," said Kathy Bostjancic, director of
macroeconomic analysis at the Conference Board in New York.
The unemployment rate has now declined for five straight
months, although part of the drop reflects discouraged Americans
giving up the hunt for work.
A broad measure of unemployment, which includes people who
want to work but have stopped looking and those working only
part time but who want more work, slipped to a near three-year
low of 15.1 percent in January from 15.2 percent in December.
Revisions to the payrolls figures showed 180,000 more jobs
were created last year than previously believed.
Mild winter weather boosted employment last month in
construction, which added 21,000 jobs after a 31,000 increase in
December. Manufacturing payrolls surged 50,000, the largest gain
in a year, after rising 32,000 the prior month.
Overall, the goods-producing sector added 81,000 jobs last
month, the most since January 2006.
Transportation and warehousing employment increased 13,100
and courier jobs only fell 1,500. Last month, the Labor
Department reported a large increase in courier jobs in
December, but revisions showed they actually declined.
Retail employment rose 10,500 after gaining 6,200 in
December. Temporary help services jumped 20,100 after rising
8,300, a potentially good sign for future permanent hiring.