Unemployment Rate Falls, Companies Add 143,000 New Jobs in January

The nation's unemployment rate dropped to 5.7 percent in January as businesses added 143,000 new jobs, a shot of good news for an ailing economy.

The increase in payroll jobs, mostly in the retail area, was the largest since November 2000, said Friday's Labor Department report. The overall rate dropped by 0.3 percentage point from the 6 percent rate in December that matched an 8-year high.

Analysts had expected the unemployment rate to hold steady at 6 percent for a third straight month, with a more modest increase in payrolls.

The surge in new jobs was concentrated in stores, restaurants and bars last month, which added 101,000 new positions. Economists had predicted that retail hiring would pick up because holiday employment was well below normal. This meant that fewer seasonal workers were laid off in January.

The job growth marks a major improvement over December, when businesses cut 156,000 jobs, according to revised figures.

Another factor contributing to the positive report was a change in the way the Labor Department compiles its survey of households, which is used to calculate the unemployment rate. Analysts included new questions about race and Hispanic ethnicity, added new job classifications and made other changes.

Labor Department officials said the changes likely had a small impact on compilation of the overall unemployment rate.

The job growth marked an improvement over December when payrolls were cut by 101,000.

Businesses, facing economic uncertainties, including a possible war with Iraq, have been wary of making big commitments in hiring and in capital spending. That has prevented big improvements in the jobs outlook for workers.

Notwithstanding the improvement from December to January, economists expect the unemployment rate to rise to as high as 6.5 percent during the summer.

Employment in construction rose by 21,000 in January. The industry's hiring peak was in March 2001, and since then 214,000 jobs have been lost.

In services, the industry added 35,000 new jobs, mostly in health care-related businesses. Hotels, motels and resorts also posted hiring gains for a second month, mostly because of a strong winter recreation season.

Air transportation jumped 22,000 last month following a decline of similar size in December. But job losses continued in communications, with 19,000 jobs cut from payrolls.

Manufacturing, which has most strongly felt the brunt of the poor economy, lost 16,000 jobs in January following a decline of 80,000 jobs the month before.