Unemployment rate lowest since 2001
Employers add 193,000 jobs in January as unemployment dips unexpectedly, wages up more than forecasts.
NEW YORK (CNNMoney.com) - The unemployment rate fell to its lowest level in nearly five years in January, the government reported Friday, as employers added a respectable 193,000 jobs to payrolls and paychecks increased more than expected.
The Labor Department said the unemployment rate dipped to 4.7 percent from 4.9 in December, the lowest since 4.6 percent in July 2001, just before the Sept. 11 terrorist attacks. Economists had forecast that the rate would remain unchanged from December.
The drop in unemployment was the latest sign of a tightening labor market, which could put upward pressure on wages and prices in the months ahead.
On Wall Street, stocks fell as investors worried that the report makes further interest rate hikes by the Federal Reserve more likely.
Treasury bond prices fell right after the report was released but later recovered.
The department said average hourly wage rose 7 cents to $16.41, a 0.4 percent increase that was slightly more than the 0.3 percent gain forecast by economists.
Over the last 12 months, average wages are up 3.3 percent on a seasonally adjusted basis, the biggest 12-month change in nearly three years.
In the part of the report that normally gets the most attention, U.S. employers added 193,000 jobs to payrolls in January, up from a revised 140,000 gain in December. Economists surveyed by Briefing.com had forecast a gain of 250,000 for January.
But the unemployment rate and wage increase seemed to be getting most of investors' attention on Wall Street.
Anthony Chan, chief economist for JPMorgan Private Client Services, said he thinks the market might be overreacting a bit to the unemployment rate, which is based on a survey of households and is generally seen as less accurate than the survey of employers for the payroll numbers.
"I didn't see the average length of the work week picking up. I didn't see an increase in the labor market participation rate," he said. "That all makes me concerned that some of the tightening talk is a bit overstated."
Jeoff Hall, the chief U.S. economist for Thomson Financial, agreed that the unemployment rate could bounce back up in coming months as those now not counted as in the labor force start to look for or find jobs.
But he also said that the department's Bureau of Labor Statistics annual revision to last year's payroll numbers showed that the job reports from the last half of 2005 understated the strength of the labor market.
"It turns out the labor market is a lot tighter than we first thought," said Hall. "If you look at the last five months alone, we had 151,000 more jobs added than the BLS had first estimated."
For a look at whether there's a bigger paycheck is in your future, click here.
For a look at the five occupations likely to see the biggest wage gains this year, click here.
For more on the job market and what it means for you and the economy, click here.