PAYROLL JOBS CUT IN JANUARY

For the first time since August of 2003, there was a loss in payroll jobs according to the Department of Labor report issued this morning. The unemployment rate fell to 4.9% from 5.0%, a modest improvement, but nearly all other news in the report was negative. For the 19th straight month manufacturers cut jobs, this time 28,000.

From the Bureau of Labor Statistics at bls.gov:

The small January movement in nonfarm payroll employment (-17,000) reflected declines in construction and manufacturing and job growth in health care.

In 2007, payroll employment increased by an average of 95,000 jobs per month. Both construction and manufacturing employment continued to decline in January, and health care employment rose.

Construction employment decreased by 27,000 in January and has fallen by 284,000 since its peak in September 2006. Over-the-month job losses occurred in residential building (-10,000) and residential specialty trade contractors (-18,000).

Manufacturing lost 28,000 jobs in January. Over the month, small declines occurred among many durable and nondurable goods industries. Manufacturing has lost 269,000 jobs over the past 12 months.

In the service-providing sector, health care employment continued to grow in January (27,000), about in line with average monthly gains over the prior 12 months. Within health care, over-the-month job gains occurred in ambulatory health care services (14,000), which includes offices of physicians, and in hospitals (10,000).

From Reuters:

The Labor Department report on Friday came in much weaker than anticipated by analysts surveyed by Reuters, who had forecast 80,000 jobs would be added last month.

"We are on the brink of a recession now," said Daniel North, chief economist for Euler Hermes ACI in Owings Mill, Maryland. "The job market is always a lagging indicator. This is a nail-in-coffin."

The report shocked financial markets.

The U.S. dollar fell sharply against other major currencies. U.S. equity index futures pared their big earlier gains and U.S. government debt prices cut earlier losses.