For the first time since August 2003, payroll levels decreased in the US in January. The loss of 17,000 jobs did not increase the unemployment rate, which remained at 4.9%, but it sends a signal to the economic markets that trouble still brews on the horizon:
Nervous employers cut 17,000 jobs in January — the first such reduction in more than four years and a fresh trouble sign that the economy is in danger of stalling.
The Labor Department’s report, released Friday, also showed that the unemployment rate dipped slightly to 4.9 percent, from 5 percent, as the civilian labor force shrank slightly.
Job losses were widespread. Manufacturers, construction firms and a variety of professional and business services eliminated jobs in January — reflecting the toll of the housing and credit debacles. The government cut jobs, too. All those cuts swamped job gains in education, health care, retailing and elsewhere.
Wage growth also slowed, another indication that employers are tightening their belts amid the economic slowdown.
The shrink in the civilian work force could have come from a number of sources. Perhaps the attrition of illegal workers has left the workforce smaller than expected. It could also be older boomers moving out of the group faster than expected. The former would also tend to reduce jobs as consumers decline in specific areas.
However, the bottom line is that our economy needs to add somewhere between 50,000 – 100,000 jobs a month to keep up with our population growth, and anything less eventually starts moving us backwards. Now we have crossed a Rubicon of sorts by seeing negative numbers in jobs for the first time in 53 months. The economic markets will see that, rightly, as a sign of continuing weakness in the economy, despite employment gains in most industries outside of residential housing and associated lending.
Expect to see the markets take a moderate hit today. The big question will be whether the Fed will wait six weeks until its next meeting to take any further action.