Unemployment rate falls to 5.6 percent in January

WASHINGTON -- The nation's unemployment rate fell to 5.6 percent in January, the lowest level in more than two years, as employers stepped up hiring -- but not at a brisk enough pace to ease concerns about the prolonged job drought.

Job growth is expected to be a key issue as November's presidential election nears. The economy has lost more than 2 million jobs since President Bush took office, the worst job creation record of any president since Herbert Hoover.

January's unemployment rate declined 0.1 percentage point to the lowest level since October 2001, when it was 5.4 percent. Last month's rate matched the 5.6 percent posted in January 2002, the Labor Department reported Friday.

Companies added 112,000 new U.S. jobs overall, marking the fifth straight month of payroll gains and the largest in three years. But economists had expected a larger increase of 150,000 new jobs or more.

"It is not disastrous news, but it is definitely disappointing," said Bill Cheney, chief economist at John Hancock Financial Services.

The report sent stocks sharply higher on Wall Street.

Analysts are looking for monthly payroll gains of 300,000 or more for sustained job growth, and the economy remains far from that mark.

Jobless numbers

About 8.3 million people were unemployed in January, with the average duration of 19.8 weeks without work.

Bush touted the lower unemployment rate while touring the National Targeting Center in Reston, Va., which provides support for counterterrorism efforts.

"That's good," Bush said. "Things are getting better. There is more to do. The economy is growing in strength."

Over the past five months, 366,000 jobs have been added. That includes an upward revision of job growth in December, from 1,000 to 16,000.

The economy is strong and jobs eventually will follow. But it has been "painfully slow, and not fast enough for George Bush," Cheney said.

Americans are anxious about the economy. A survey of consumers by The Associated Press and Ipsos-Public Affairs in early February found Americans were less enthusiastic about the economy's prospects and their own financial situations in the months ahead. However, consumers' feelings about job security showed little movement from January.

Democrats are seizing on the troubled job market to boost their election prospects, and some Republicans recognize they might be vulnerable.

Those concerns led 39 House Republicans to break rank this week and support a Democratic measure to provide 13 weeks of extra unemployment benefits to people who exhaust their state benefits. Democrats are pushing for a vote on the issue in the Republican-controlled Senate.

"The administration can talk about productivity and the stock market and how the rich are getting richer, but the election will be about jobs, jobs, jobs," said Rep. Charles Rangel, D-N.Y. "And this administration's record on jobs as been dismal."

Rep. Bill Thomas, R-Ca., chairman of the House Ways and Means committee, had a different take. "The U.S. economy is creating jobs and rapidly expanding, he seaid. "Tax relief is working."

Hiring by retailers and construction companies accounted for much of the overall increase in payrolls in January. Factories continued shedding jobs for the 42nd month in a row, though at a slower pace than in previous months.

Some economists think job growth is occurring in the U.S. economy, but it is not reflected in the Labor Department's monthly survey of business payrolls. In the separate survey of households, which determines the jobless rate, employment jumped by 496,000 last month.

The household survey counts self-employed workers and contract workers, which are increasing. The survey of businesses does not.

"They're not recording the outside contractors -- they're not reflecting something that is tremendously fundamental now to the American corporate scene, and that's outsourcing to outside contractors," said Ken Mayland, president of ClearView Economics.

Businesses are being squeezed by intense competition from other countries and soaring health care and pension expenses. They are holding down costs by outsourcing, working their employees harder and shipping jobs overseas.

Just this week, companies announcing layoffs included Cigna Corp., Carrier Corp. and The Boeing Co.

"Whatever the reasons, they aren't hiring," Cheney said. "This keeps raising concerns that maybe something really is different this time and the process isn't working the way it's supposed to anymore."

Friday's report showed workers are indeed working more hours. The average work week climbed by 0.2 hour to 33.7 hours. The manufacturing work week increased by 0.3 hour to 40.9 hours.

Construction companies helped boost overall hiring gains, adding 24,000 jobs last month. Buoyed by continued strength in the housing market, the sector has added 147,000 positions to its payrolls since last March.

In the service sector, where most of the job growth is taking place, retailers added 76,000 new jobs. Garden supply and home building material stores were particularly strong, also reflecting a strong housing market.