The nation’s unemployment rate shot up to 5.7 percent in January as job creation fell to a 12-month low. Still, The Clinton administration and many private economists contend there’s plenty of vitality left in the economy.
The jobless rate, up from 5.4 percent in December, matched the level of October, the Labor Department reported Friday. At the same time, it said payrolls increased by just 134,000, the smallest rise since 101,000 jobs were created in January 1994.
American financial markets reacted euphorically to the news, reflecting investor optimism that the weakness means an end to the series of interest-rate increases engineered by the Federal Reserve, which started exactly one year ago, to slow the economy.
The Dow Jones industrial average had shot up 57.87 points to close at 3,928.64, its highest one-day gain since September.
The Treasury’s 30-year bond price soared more than $12 per $1,000 in face amount and its yield dropped to 7.63 percent, a five-month low.
But analysts said the unemployment numbers may have overstated the weakness. They said the unemployment rate moved up in part because more Americans re-entered what they perceived to be an expanding labor market than were able to find jobs. And many of the job losses were in government or due to inclement weather.
“On the surface, they are not strong figures,” said Eugene Sherman, an economist with M.A. Schapiro & Co. in New York. “But one needs to probe beneath the headlines. They depict a strong economy.”
In Idaho, the unemployment rate headed in the opposite direction.
January’s seasonally adjusted unemployment rate plunged a full percentage point to 5.4 percent in the largest month-to-month decline in seven years.
The Department of Employment said mild weather during the month opened up thousands of job opportunities. Combined with a static labor force, that pushed the jobless rate back below the national level for the first time in two months.
The Washington Department of Employment Security releases unemployment information about three weeks later than the comparable Idaho and national offices.
Nationally, the increase in the unemployment rate was the first since January 1994, when it went up 0.3 percent. But that was due to a change in measurement methods. Prior to that increase, the last time unemployment rose was June 1992, when it increased by 0.2 percent.
The number of unemployed workers rose by 343,000 in January, to 7.5 million.
Many analysts on Wall Street saw the employment report as a sign of an emerging slowdown. As a result, fears of further interest rate increases eased and both stocks and bonds were posting strong gains.
Warning against reading too much into a single month’s report, Labor Secretary Robert Reich contended, “The American jobs machine continues to hum, despite a one-month uptick in the unemployment rate. The trend of solid, stable job growth continues.”
While many economists also saw continued strength in the report, they acknowledged that economic growth may be slowing.
“We’ve gotten to the point in the expansion where we are starting to get mixed signals,” said Chris Varvares of Laurence H. Meyer & Associates, a St. Louis economic forecasting firm. “Today’s (report) is a good example … and the fact that it is mixed is a sign of a slowdown,” he contended.
Relatively mild temperatures in much of the nation resulted in the addition of 27,000 new jobs in the construction industry. But while the weather resulted in job growth in some parts of the nation, it hurt in other areas.
Katharine G. Abraham, commissioner of the Bureau of Labor Statistics, told the congressional Joint Economic Committee that a lack of snow hurt the ski industry and heavy rains adversely affected West Coast farm workers.
As a result, service industries created just 53,000 new jobs in January, the smallest monthly gain in nearly two years.