U.S. Loses Jobs For First Time In Five Years
Pressure Mounts to Pass Stimulus Plan

By Neil Irwin
Washington Post Staff Writer
Saturday, February 2, 2008

The nation shed jobs in January, the government reported yesterday, the first monthly loss since 2003, providing fresh evidence that the housing downturn and credit crisis have spread to the job market.

Economists have been counting on steady growth in wages and the number of jobs to keep American households afloat even as their homes become less valuable and the stock market slumps. The net loss of 17,000 jobs in January undermines that expectation, putting even more pressure on Congress to agree on a stimulus plan. Economists had forecast a gain of 70,000 jobs.

President Bush acknowledged the weakening economy. "There are certainly some troubling signs," Bush said yesterday in Kansas City, Mo. "There are serious signs that the economy is weakening, and that we've got to do something about it."

In his State of the Union Address on Monday, Bush said that the nation had added jobs for 52 consecutive months. He also said that there was "uncertainty" about the economy in the short term.

The unemployment rate was 4.9 percent in January, the Labor Department said, down from 5 percent in December, but still more than the November level of 4.7 percent. Job growth in December was stronger than previously reported, though it was still lower than the rate of job creation needed to match the growth in the labor force.

The January job growth figure will be revised next month as more complete data become available. Whatever that revision, there are clear signs that the labor market is the softest it has been in years. The number of claims for unemployment benefits has risen in recent weeks, and surveys show that increasing numbers of Americans say it is hard to find work. Companies cut back on hours for employees in January, and earnings for non-managers declined.

"There's no question the job market is slowing," said Roy G. Krause, chief executive of Spherion, one of the country's largest recruiting firms. He said conditions remain strong for those with advanced skills.

Democrats blamed the weak results on Bush. "Today's report that our economy actually lost jobs in January confirms my view that we are sliding into a second Bush recession," Sen. Hillary Rodham Clinton (D-N.Y.) said in a statement. Citing the new numbers, Clinton and rival Sen. Barack Obama (D-Ill.) called for the economic stimulus package to include an extension of unemployment insurance benefits, a request the Bush administration has rejected.

The steepest job losses were, as they have been for months, in construction, which shed 27,000 jobs, and manufacturing, which lost 28,000 jobs. Construction employers have cut 141,000 jobs in the past year, reflecting the sharp downturn in the housing sector.

The continued loss of manufacturing jobs occurred despite rising exports. Part of the weakness is tied to manufacturers who produce lumber and other goods used in home construction. Ongoing problems in the auto industry also contributed to the losses in manufacturing.

Banks and other financial institutions cut jobs, reflecting their ongoing financial woes, with a loss of 4,300 jobs in "credit intermediation" and related companies.

Before January, a broad range of service industries had been growing fast enough to more than make up the difference. Now, those industries are reporting either weak job growth or are shedding positions.

The number of administrative and support jobs fell by 21,500, for example, and the number of state government education jobs was off by 26,000, which could either be evidence of lower property tax revenue related to the housing slump or a quirk in the way the government adjusts for seasonal ups and downs. The leisure and hospitality sector, which includes hotels and restaurants, added 19,000 jobs, down from the average 30,000 a month that the industry had been adding over the past year.

"We are on a downward trajectory," said Carl R. Tannenbaum, an economic consultant in Chicago. "Firms are cutting back in expectation of difficult times."

Some economists think it likely that the negative job report will turn out to have overstated the weakness. In its August report, the Labor Department said there was a small decline in the number of jobs, but then revised that data to a gain the next month.

But the overall direction of the labor market is clear. In the past three months, the nation has averaged 41,700 new jobs per month; a year earlier, employers created 169,000 new jobs a month in the same span.

"This is perfectly consistent with all the other signals flashing that we're having a slowdown, if not a recession," said Jared Bernstein, a senior economist at the Economic Policy Institute in the District.

That could make for a tough year for U.S. consumers. Economists had been counting on continued employment and wage growth to sustain consumer spending. A weaker employment situation, when coupled with the weak housing market, could spell trouble.

"We rely on job creation and the wages that come with it for spending power," Tannenbaum said. "Without job creation and income growth, people will have to consume less."

There was some modestly positive news yesterday about the manufacturing sector. The monthly survey of purchasing managers, which reported that manufacturers were cutting back in December, moved into positive territory in January. The index by the Institute of Supply Management rose to 50.7, from 48.4. A number more than 50 indicates manufacturers are expanding; less than 50 means shrinking.

The stock market rose as the weak economic news was counteracted by Microsoft's bid for Yahoo and reports of a bailout of the second-largest bond insurer, Ambac Financial Group, by a consortium of banks. The Dow Jones industrial average rose 0.7 percent, and the Standard & Poor's 500 was up 1.22 percent.

Market participants have been nervously watching Ambac and its competitors, which have insured billions of dollars worth of complicated subprime mortgage securities. The value of those securities has plunged during the credit crisis.

Staff writers Michael Abramowitz in Kansas City, Mo., and Tomoeh Murakami Tse in New York contributed to this report.

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