The US economy lost 17,000 jobs in January marking a decline in employment for the first time since August of 2003, the Labor Department said today in a fresh sign of brewing economic trouble.
The news sent the dollar close to its all-time low against the euro, as the European currency jumped to $1.4950, very close to the record of $1.4967 hit on November 23. It later fell back to $1.4840.
The loss of non-farm jobs caught most economists off guard as many had predicted that employment growth would remain positive in January.
The unemployment rate, based on a separate survey, declined a notch to 4.9% last month compared with 5% in December, the Labor Department said.
Most economists had anticipated that the world's biggest economy would create 70,000 new jobs in January. December's job growth was revised significantly higher to show 82,000 new jobs were created compared with an initial estimate of 18,000 positions.
The surprise loss in jobs comes days after the government reported that US economic growth slowed to a 0.6% annualised crawl in the fourth quarter of 2007 from a blistering 4.9% clip in the previous quarter.
Separate figures from the Institute for Supply Management showed that its index of US factory activity rose to 50.7 in January from 48.4 in December. Any figure over 50 means growth. Consumer sentiment also rose, according to a Reuters/University of Michigan Survey, though not as much as had been forecast.
The Federal Reserve has launched a rate-cutting drive in a bid to shore up economic growth amid mounting fears that the economy could be falling into a recession. Congress is also debating an economic stimulus plan.
A two-year long housing slump is threatening to derail economic growth and the employment report showed that the housing downturn weighed heavily on the employment market last month.
The report revealed that 28,000 jobs were shed in the construction industry which is laying off workers as home builders cut back on new developments.
The manufacturing industry also fared badly as 28,000 jobs were lost in the sector while professional and business services companies laid off 11,000 employees. Other industries, which hired workers, offset some of the declines, however.
The education and health services sectors hired 47,000 new workers during the first month of the year while the retail industry added 11,000 new positions.
Average hourly earnings increased 0.2% last month, compared to analyst expectations of a 0.3% rise in earnings.
The job report is likely to trouble the Fed as it suggests some sectors of the economy are in retrenchment despite aggressive moves by the central bank since September to slash borrowing costs.
The Fed cut its key federal funds interest rate by half a percentage point to 3% on Wednesday in a bid to underpin economic momentum, eight days after slashing borrowing costs by an historic three quarters of a percentage point.
