WASHINGTON — Friday’s surprisingly strong January jobs report prompted hope that the economy’s recovery is finally kicking into high gear.
“It feels like businesses are finally looking to expand their operations, which means more hiring,” said Mark Zandi, chief economist for Moody’s Analytics, a forecasting and consulting firm. “The lack of hiring has been the missing link in this recovery. We may have found the missing link.”
Employers added a better than expected 243,000 non-farm payroll jobs in January and the unemployment rate fell to 8.3 percent, the Bureau of Labor Statistics reported Friday. Private-sector employers actually added 257,000 jobs in January, but the national total was dragged down by 14,000 lost government jobs.
Most encouraging was the broad nature of job gains. Manufacturing added 50,000 posts, and professional and business services — many of them well-paid white-collar jobs — posted the largest gain, 70,000 new jobs.
Even the hard-hit construction sector improved, adding 21,000 jobs.
“It is a fantastic jobs report, not a single blemish,” said Zandi. “Jobs were up big, and unemployment was down big. All the leading indicators in the report suggest continued solid job growth at least into the spring.”
The unemployment rate fell another two-tenths of a percentage point to 8.3 percent — the fifth straight month that the unemployment rate dropped. It was at 9.1 percent as recently as August.
Wall Street investors sent stocks soaring. The Dow Jones Industrial Average rose 157 points, or 1.23 percent, to close at 12,862. The NASDAQ rose 46 points, or 1.61 percent, to close at 2,906. The Standard & Poors 500 rose 19 points, or 1.46 percent, to close at 1,345.
“The real stimulant to future economic growth is the ‘boost in confidence’ this report provides to the roughly 92 percent of the workforce (that) already has a job,” said James Paulsen, chief investment strategist for Wells Capital Management, in a research note.
Over the past three months, employers have averaged job creation above 200,000; this trend mirrors strong recent data on manufacturing, car sales and improving consumer sentiment.
Adding weight to that view, new data Friday showed that December factory orders were up modestly and a closely watched index of non-manufacturing activity shot up 3.8 percentage points.
President Barack Obama welcomed the numbers during an appearance at a suburban Washington fire station in Arlington, Va.
“The numbers came down because more people found work … these numbers will go up and down in coming months … but the economy is growing stronger, the recovery is speeding up,” he said.
The president pressed Republicans in Congress to support the economy by extending the payroll tax holiday that is set to expire at the end of this month.
“They’ve got to renew the payroll tax cut they’ve extended and do it without drama, without delay, without linking it to some ideological side issue,” Obama said. “Now is not the time for self-inflicted wounds for our economy. Don’t muck it up — keep it moving in the right direction.”
House Speaker John Boehner, R-Ohio, blamed Democrats for holding up the payroll tax extension, and in a statement, he gave a qualified thumbs-up for the January numbers.
“There’s welcome news in this latest jobs report as more Americans found work last month, but the fact is our unemployment rate is still far too high,” Boehner said. “Our economy still isn’t creating jobs the way it should be, and that’s why we need a new approach.”
The work force shrank by about 1.2 million workers in January, which may have helped drive down the unemployment rate. The Labor Department began using new adjusted numbers to calculate workforce size, spurring some economists to question the falling jobless rate.
The head of the White House Council of Economic Advisers, Alan Krueger, shot down the debate over labor force participation rates in a blog posting.
“The drop in unemployment over the month was entirely due to employment growth, as the labor force participation rate remained constant, once new population weights are taken into account,” Krueger wrote. “The unemployment rate has fallen by 0.8 percentage point in the last 12 months. … The economy has added private-sector jobs for 23 straight months, for a total of 3.7 million payroll jobs over that period. … Nevertheless, we need faster growth to put more Americans back to work.”
If the hiring numbers stay strong in coming months, it would confirm that Europe’s debt woes are having less of an impact on the U.S. economy than economists thought and it may force revised projections of sluggish U.S. growth for the first half of 2012.
“We believe that consensus expectations for growth are understating the rising momentum in the economy,” economists for forecaster RDQ Economics in New York wrote in a note to investors.
Weather factors contributed. In a note to investors, Steve Ricchiuto, chief economist of Mizuho Securities, said sharp weather swings late last year and in January have skewed the numbers. Still, he said, “the (unemployment) claims data does, however, suggest that payrolls should be growing by 175 K instead of last year’s 125 K,” he said.
Whatever the pace, the trend is clearly improving, and importantly, across all sectors.
“Overall, these numbers show renewed strength in the domestic economy, with employment growth in almost every major industrial sector except information, financial services and government. It mirrors other recent economic indicators showing an uptick in activity since October,” Chad Moutray, chief economist with the National Association of Manufacturers, wrote in his blog Shopfloor.org. “Moreover, several sentiment surveys suggest that manufacturers are optimistic about future production and employment in 2012, which should bode well for this year’s numbers.”
The upbeat view was shared by Brian Hamilton, CEO of Sageworks, a company that compiles economic data about privately held companies. These companies, he said, have shown 18 months of revenue and profit growth.
“As the length of time increases over which their revenues grow, they will begin to hire. This has been historically true and … we expect this to be true in the future. The past several recent jobs reports seem to indicate that private companies are beginning to look toward the future and consider hiring,” Hamilton said.