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Weak jobs report still provides bit of hope

by CHRISTOPHER S. RUGABER and PAUL WISEMAN Associated Press

WASHINGTON - For a second straight month, weak U.S. job growth has raised concern that the economy has lost the vigor it showed late last year.

A tepid gain of 113,000 jobs in January followed December's puny increase of 75,000 - far below last year's average monthly gain of 194,000.

Yet the jobs report the government issued Friday offered cause for optimism. Solid hiring last month in areas like manufacturing and construction point to underlying strength.

And in a healthy sign, more people began looking for jobs in January. A sizable 115,000 formerly unemployed people also said they found jobs. Their hiring reduced the unemployment rate to 6.6 percent, the lowest in more than five years.

Most economists say they think hiring will strengthen during 2014 as the economy improves further.

Job growth "clearly has downshifted over the past two months," said Doug Handler, chief U.S. economist at IHS Global Insight. "But we still believe the economic fundamentals remain strong and ... forecast an acceleration of growth later in the year."

Janet Yellen will be pressed about the job market and the economy when she testifies to Congress next week in her first public comments since becoming Federal Reserve chair on Feb. 1. Fed officials are scaling back their stimulus for the economy. They have also said they would consider raising their benchmark short-term interest rate at some point after the rate falls below 6.5 percent.

But the Fed hasn't been clear about the timing. With the unemployment rate now close to that threshold, economists think the Fed may update its guidance after its next meeting in March.

Friday's jobs data suggest that the economy may slow in the first few months of the year from its robust 3.7 percent annual pace in the second half of 2013. The hiring figures follow other signs of a possibly softening economy. A survey of manufacturing firms showed that factory expansion slowed last month. A measure of forthcoming home sales fell.

The jobs report offered some hints that hiring could return to last year's healthier levels in coming months.

To begin with, the unemployment rate is at its lowest point since October 2008, just as the financial crisis was erupting. The rate fell because many of the unemployed found work. And the influx of people seeking jobs - a sign of optimism - was an improvement from December. In that month, the unemployment rate fell only because about 350,000 people stopped looking for work and were no longer counted as unemployed.

Another positive sign: Manufacturers, construction firms and mines added a combined 76,000 jobs last month - the most since January 2006. Goods-producing employers like those tend to hire only when they're confident in the economy.

"You rarely see expansions in these industries without the economy being in fairly healthy shape," said Gary Burtless, an economist at the Brookings Institution.

Home sales and construction are rising, a trend economists expect to continue. If it does, more construction jobs should lead to more retail spending as people furnish homes.

Several industries shed jobs last month, but the losses were likely temporary. Retailers cut nearly 13,000 jobs, but that followed three months of huge gains.

And government jobs dropped by 29,000. Local governments shed 11,000 jobs, partly because bus drivers and cafeteria workers were temporarily laid off when winter weather closed schools. The federal government cut 12,000, including 8,500 at the U.S. Postal Service.

Economists don't expect such deep cuts to continue. State and local tax revenues have recovered after plunging during the Great Recession.

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