Jan. Job Growth Weaker Than Expected; Jobless Rate Drops

U.S. employers added just 146,000 new jobs in January, the government said Friday in an unexpectedly weak report on the job market that also revised the previous three months' hiring lower.

A drop in the number of job-seekers pushed the unemployment rate to its lowest level in three years. For all of 2004, the economy added 2.2 million jobs.

The gain in nonfarm payrolls (search) in January came in below market expectations for a more robust gain of around 200,000 but was enough to return the nation's employment to where it was before the 2001 recession began. It also erased the jobs lost during President Bush's first term.

January's increase in hiring came after a downwardly revised 133,000 gain in December. The Labor Department (search) also cut its estimate to a total of 59,000 jobs over the fourth quarter of 2004.

Still, the unemployment rate (search) fell to 5.2 percent, the lowest level since a 5.0 percent reading in September 2001. The drop came amid a fall in the number of people in the labor force, which includes both those with jobs and those looking for work.

In Friday's report, there were employment gains in January in a wide variety of service sectors, including retail. But these were partially offset by job losses at factories and in construction

Manufacturers, which were hardest hit by the 2001 recession and have struggled the most to get back on firm footing, lost 25,000 jobs in January, after shedding 7,000 in December. It marked the fifth straight month that the factory sector lost jobs.

Construction companies cut 9,000 positions in January, probably related to wintry weather. That came after 14,000 positions were added in December.

The service sector, the engine of job creation, showed hiring gains in January. Retailers added around 19,000 jobs, an improvement from a loss of around 8,000 in December. Job gains also were reported for education and health services, in the financial sector and in transportation.

As expected, the Labor Department also said it had revised up its measure of jobs created in the year to March 2004. In its annual benchmark revision, the government statisticians said 203,000 more jobs were created in the March 2003-March 2004 period. The revision was expected and does not change the general outlook for employment.

Reuters and the Associated Press contributed to this report.