The jobless rate in the US has dropped to 8.3%, marking the lowest rate in three years, according to US Labor Department data.
Growing at a rate of 200,000 jobs per month, the economy is looking up. Prior to the latest unemployment data, economists had expected stagnant employment growth in January.
Instead, job growth could be seen in all sectors but was particularly strong in the healthcare, hospitality and manufacturing industries. Last month, private sector employment grew by 257,000 new jobs, representing the largest improvement since April. In manufacturing alone, 50,000 jobs were added, more than any monthly job figure in the industry since 1998.
According to a statement by PNC Financial Services Chief Economist Stuart Hoffman, the unexpected decline in unemployment is a signal of a “self-sustaining economic expansion.”
Economists were also pleased with a report showing a one-year high in service sector activity in January, with service sector employment reaching a six-year high. Average hourly earnings have also improved by $0.04, which could lead to higher rates of consumption.
The rise in employment led to a rally on the index market, with the Dow Jones almost reaching a four-year high as tech-heavy Nasdaq nailed an 11-year high. In contrast, US Treasury note prices fell as investors shifted their money away from expectations of quantitative easing.
Investors are casting doubt on the assumption that interest rates can remain at a near-zero low until 2014; interest rate futures have risen from 29% to 38%.
Presidential Candidates React to Unemployment Numbers
Now that the unemployment rate has dropped, Republican candidates running for President are readjusting their attacks on Obama. The candidates are predominantly reminding voters that the unemployment rate is still above 8%.
Mitt Romney responded to the unemployment data in a statement, saying: “Unfortunately, these numbers cannot hide the fact that President Obama's policies have prevented a true economic recovery. We can do better.”
Obama said upon news of the jobless report that despite numbers showing a strengthening economy, there are still too many unemployed or under-employed Americans.
Roughly 23 million Americans remain jobless or under-employed.
According to analysis from UCLA associate professor Lynn Vavreck, there is a correlation between the direction of unemployment and votes, but no correlation between vote share and the unemployment rate. In other words, the decline will help Obama's campaign regardless of the rate at which unemployment drops.
Trends tell a story, and Obama's campaign site has posted an illustrated image of 23-consecutive months of job growth, which includes past initiatives like the Recovery Act and the payroll tax cut.
Key Statistics - US Job Creation in January 2012 (source: Reuters)
- Employment in retail grew an additional 10,500 in January after rising 6,200 in December.
- After growing 32,000 in December, manufacturing jobs rose by 50,000 in January, the largest surge in a year.
- Last month, 81,000 jobs were created in the goods-producing sector, the most since in six years.
- Construction added 21,000 jobs last month after adding 31,000 jobs in December.
- Warehousing and transportation employment grew by over 13,000 last month.