Unemployment rate drops to 8.3 percent. Is that a problem for Mitt Romney?
It could become harder for Republicans such as Mitt Romney to blame President Obama for a lack of jobs. In January, the unemployment rate fell to its lowest level since February 2009.
Helped by unseasonably warm weather in January, the US economy went on something of a job-creating blitz.
In a surprise to Wall Street economists, the economy added 243,000 jobs in January, the Bureau of Labor Statistics (BLS) reported Friday. That's the best performance since last April. In addition, the unemployment rate dropped from 8.5 percent to 8.3 percent, its lowest level since February 2009, just after Barack Obama took office.
Over the past three months, the economy has been creating an increasing number of jobs and has averaged about 200,000 per month. This is prompting some to forecast that the economy is now moving into a higher gear, where a growing number of employed people provide the impetus for economic growth.
If this happens, it may be harder for Republicans such as Mitt Romney to blame Mr. Obama for a lack of jobs in the economy.
“This election is all about the politics of economics,” says Joel Naroff of Naroff Economic Advisors in Holland, Pa. “Will jobs be as important an issue in September as they are today?” he asks. “If not, it will be an indication the economy has turned.”
In the latest jobs report, the strongest sectors were professional and business services, which added 70,000 employees on a seasonally adjusted basis, including about 33,000 temporary jobs. The addition of temp jobs is normally considered a positive sign since businesses often hire temps before taking on permanent employees.
The economy also tacked on job gains in leisure and hospitality, especially in restaurants and bars, as well as in health care and retail. The manufacturing sector continued to add jobs in large part because the automobile companies are ramping up production.
However, the big gain in temps may be more weather-related, says economist Scott Brown of Raymond James & Associates in St. Petersburg, Fla. “There were no major snowstorms,” he says, noting that on a nonseasonally adjusted basis, the economy actually lost 2.7 million jobs in January, reflecting the end of the holiday-hiring period.
The numbers, he says, indicate that fewer construction workers and others lost their jobs because the weather was good. In fact, he says, only 206,000 people were unable to work because of the weather last month, compared with an average of 425,000 the previous five Januarys, according to the BLS household survey.
“You have to look at these numbers with a grain of salt,” says Mr. Brown. “If this hiring continues in February, March, and April, that would be really something.”
Economist Mark Zandi of Moody’s Analytics in West Chester, Pa., agrees that the January numbers appear to be somewhat overstated. He says he would not be surprised to see some softness in February. “We get monthly ups and downs,” he says.
But he says the job market is moving in the “right direction,” citing improvements in hours worked, temp jobs, and small-business hiring.
“It feels like the underlying job growth is closing in on 200,000 new jobs per month,” he says. “Once we get north of that, the unemployment rate will start to come down.”
In Washington, there were plenty of signs Friday that the two parties still disagreed over how to create jobs.
Obama, speaking at a firehouse in Arlington, Va., said the economy was not out of the woods yet and called on Congress to extend the payroll-tax cuts and provide emergency unemployment benefits through the end of the year.
“Don’t muck it up,” he said.
The Republicans, while welcoming Friday's news, said the unemployment rate was still too high. “Our economy still isn’t creating jobs the way it should be and that’s why we need a new approach,” said House Speaker John Boehner in a statement.
Rep. Kevin Brady (R) of Texas argued that Obama’s approach to the economy was making things worse. In a statement, he said, “Instead, we need to restore confidence by businesses on Main Street to make the new investments in buildings, equipment, and software to create millions of jobs.”
The political drama continues to take a toll on business confidence, says Frank Fantozzi, CEO of Planned Financial Services in Cleveland.
Mr. Fantozzi says from talking to his business clients, he senses they would like to hire additional workers. “But they are nervous about whether there will be a change in Washington,” he says. “We will see them a lot more confident once they get a better feel about what is going to happen this fall in the elections.”