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U.S. job losses raise recession worries

In the first such loss in four years, 17,000 jobs were shed in January.

By Staff writer of The Christian Science Monitor / February 4, 2008

On the line: Unemployed people waited in line at the California Employment Development Department in San Jose, Calif., last month. Job creation has slowed in recent months.

Paul Sakuma/AP

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In a worrisome sign, America's job market may be freezing up even in areas far removed from housing or mortgage loans.

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In January, stagnation in the economy's giant service sector helped cause the first monthly decline in jobs in over four years.

If the job market is now eroding, it could signal both the onset of a recession and an even more pivotal role for the economy in the presidential election campaign.

Until recently, the job market has been an important bulwark against economic downturn. Home builders and factories have been downsizing, yet employment remained reasonably good elsewhere in 2007. From schools to restaurants and retail stores, employers hired people and didn't lay off too many.

But last month, the hiring all but stopped.

"The big difference between December and January was the service sector – both government and private," says Nigel Gault, an economist at Global Insight, a forecasting firm in Lexington, Mass.

Service employers, who provide the paychecks for more than 8 in 10 US workers, didn't actually lose jobs for the month. But they added just 34,000 new jobs, down sharply from 143,000 in December and well below the four-year average of about 158,000 a month.

The result: After factoring in losses in nonservice industries, the economy overall lost 17,000 jobs, the first monthly loss since August 2003.

The job numbers, released by the Labor Department Friday, are preliminary and will be revised up or down somewhat in the weeks ahead.

Despite this January's decline in business payrolls, the nation's unemployment rate improved modestly, to 4.9 percent after hitting 5 percent in December. Still, the jobless rate has edged up from a recent low of 4.4 percent last March.

But beyond this one monthly report, the job market has been slowly weakening by several measures. The length of the average workweek has edged down. Fewer industries are adding jobs. And even when 12-month average figures are used, the pace of job creation has been cooling off in recent months.

Still, experts are divided over whether this signals the onset of a recession.

"[It's] a much weaker economy ... but it's still not in the territory where you'd say it's fallen off a cliff," says Jonas Prising, president of the North American division of Manpower Inc., a major provider of temporary staffing services. Often in recessions, he notes, monthly job losses total 100,000 or more.

The temporary help industry is often one of the first to feel the effects of an economic slowdown. Instead of a sharp dive in temp employment, which Mr. Prising says is typical heading into a recession, what's occurred in recent months is more a slow slide.