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The surprise loss in nonfarm payrolls caught most economists off guard as many had expected employment growth to continue in January.
Economists had anticipated that the world's biggest economy would create 70,000 new jobs in January, but the Labor Department on Friday said payrolls fell for the first time since August 2003 in a report President George W Bush called "troubling."
"We should expect to see more bad news on the labor market, at least through the middle of the year, before the heavy doses of monetary and fiscal stimulus begin to kick in," said Nigel Gault, an economist at Global Insight.
The government revised December's job growth significantly higher to show 82,000 new posts were created compared with an initial estimate of 18,000 positions.
The national unemployment rate, based on a separate survey, declined slightly to 4.9 per cent last month compared with 5.0 per cent in December. Economists said this was partly because fewer people were seeking work.
"Ultimately, it means the Fed has got to keep cutting (interest) rates," said Ian Morris, a chief US economist at HSBC North America.
The monthly job survey was released after the government reported Wednesday that US economic growth slowed dramatically to a 0.6 per cent annualized crawl in the fourth quarter of 2007 from a blistering 4.9 per cent in the prior quarter. The Federal Reserve has launched an aggressive rate- cutting drive to shore up growth amid increasing worries that the economy is on the verge of a recession.
Congress is meanwhile debating an economic stimulus plan worth around 150 billion dollars amid rising political angst about the state of the economy.
A persistent housing slump is threatening to derail growth as well as triggering job losses.
A total 27,000 jobs were shed in the construction industry in January, partly as home builders cut back on new developments.
The manufacturing sector cut 28,000 jobs while professional and business services companies laid off 11,000 white-collar employees.
"There are certainly some troubling signs, serious signs that the economy is weakening and we've got to do something about it," Bush said during a visit to the Midwestern state of Missouri.
The layoffs are likely to concern the Fed as it suggests some sectors of the economy are in retrenchment despite sustained moves by the central bank since September to trim borrowing costs.
The Fed cut its key federal funds interest rate by half a percentage point to 3.00 per cent on Wednesday in a bid to underpin economic momentum, eight days after slashing borrowing costs by an historic three quarters of a percentage point.
Central bank policymakers are next scheduled to meet on March 18 although they can hold a rate meeting anytime they want.
Job losses have spread into business services as major banks, such as Citigroup and Lehman Brothers, and ailing mortgage companies have laid off workers amid the housing market downturn.
Some industries hired new employees last month, however.
The education and health services sectors hired 47,000 new workers during the first month of the year while the retail industry added 11,000 new positions.
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Ratingthe recession of america is nothing new for capitalism which suffer a incurable disease of demand crisis. lack of purchase power of common man such recession cycle often rule the world
No one has explained in layman’s language as to why the American economy is heading towards recession. There are numerous references holding the banking sector responsible for it in that the banks liberally advanced housing loans at high sub-prime rates without adequate collateral coverage and disregarding the redemption capacity of the borrowers. The banks, it appears, believed that the buoyancy of the economy would be sustained irrespective of the growth of other countries mainly China and India impacting on it. Repeated lowering of interest rate by the Fed and tax cuts related to salaries of people would certainly make a difference but it would be only after say, six months that their results would appear. In the final analysis, it is the high growth of India and China that explains the US lagging behind in the race. Things are so bad that increase in America’s export due to devaluation of the dollar has not been able to counter the domestic recessionary trends. This is symptomatic of what is called in the World Economic Forum he effect of ‘decoulpling’ which means that India and China are not as much dependent on America as they were say, five years ago.
USA is a rouge state. They hv been bullying and intimadating all the smaller countries including ME on the basis of their military power. They deservse to go into recession and economic downturn. The present president will leave USA pauper and beggers when he leaves office in November. The time will come that USA will go around with begging bowl to the Arabs and China. The other day I was watching the debate of the republican candidates where they were indicating of asking for a loan from China. They should be invaded and made slaves for what they hv done to Iraq and Afghanistan. It is the curse of Iraqi and Afghan people for what US has done to their country. They hv been spreading lies and wants to oppress the people of ME and make a greater Isreal a reality. Curse to this big Satan!What has happen in the history to the Roman Empires and the Hitlers and British will definately happen to US for their sins in this world.
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