U.S. Lost Jobs in January, Fueling Fears of Recession

WASHINGTON — After 52 straight months of employment growth, the country lost 17,000 jobs in January, the Labor Department said Friday in a report that surprised and worried economists.

Although he did not use the word "recession," President Bush acknowledged "there are serious signs that the economy is weakening and that we've got to do something about it."

Speaking at Hallmark Cards Inc. in Kansas City, where the company is headquartered, Bush called on Congress to quickly approve a $146 billion economic stimulus package to spur growth.

His remarks followed the Labor Department's announcement that non-farm payrolls shrunk by 17,000 jobs last month. Most economists had been expecting an increase of roughly 75,000 jobs.

The unemployment rate actually dipped, slipping to 4.9 percent from 5 percent in December, but that was because the labor force shrank as people stopped looking for work.

The jobs report "certainly raises my estimate of whether we're likely to end up in a recession," said James Wilcox, a University of California-Berkeley professor who served as senior economist with the President's Council of Economic Advisers during the 1990-91 recession. "The odds have kicked over the 50-50 line as to whether we are going to have one."

A Commerce Department report added to the gloom. It showed that single-family construction plunged 5.4 percent in December, marking the largest monthly drop since at least January 1993 when the government began tracking the figure.

Michael Nipple, a regional economist with Global Insight Inc., a forecasting firm, said the severity of the downturn in each region depends largely upon its housing market.

"The housing data are still pretty good for Texas and much of the South," Nipple said. "But California, Florida and the Midwest are hurting."

The combination of an auto industry slowdown and housing slump has already put Michigan into recession, and now "Ohio is close," he said.

The grim news intensified the pressure on Congress to approve a package of tax incentives for businesses and tax rebates of up to $600 for individuals or $1,200 for couples filing jointly.

The House already has passed the legislation with Bush's support. But the Senate has delayed action as Democratic leaders round up support for a more generous version that would include more rebates, extended unemployment benefits and more food stamps.

Senate Majority Leader Harry Reid, D-Nevada, said in a statement that in light of the dismal jobs report, Republicans should "recognize the urgency of helping Americans who are being pushed out of the workforce."

But House Republican Leader John Boehner, R-Ohio, said in a statement that Reid should drop his quest for a more expensive package and instead approve the House version "without any further delay."

Even if Congress does move quickly in coming weeks, the tax rebate checks likely would not get sent out until well into spring. Some economists fear that may be too late, given how quickly the job market is deteriorating this winter.

The Labor report showed that in January, payroll losses were particularly severe at construction companies, where employers cut 27,000 jobs. That industry has lost 284,000 jobs since its employment peak in September, 2006.

Meanwhile, manufacturers cut 28,000 jobs in January. Over the last 12 months, they have eliminated 269,000 jobs.

Wage growth also slowed last month. The average hourly earnings rose just 0.2 percent to $17.75 in January. That was half the pace recorded in December.

"The weakening job market is a kick in the stomach to working families already suffering a generation-long stagnation of wages and rising insecurity," John Sweeney, president of the AFL-CIO labor organization, said in a statement.

The Labor report also showed that the 2007 labor market was weaker than data initially suggested. Employers added an average of just 95,000 jobs a month last year, compared with an earlier estimate of 111,000 a month. In December, employers added just 82,000 jobs.

Those numbers reflect a big drop from 2006 when payrolls rose by an average of 175,000 a month. Economists say the country should add roughly 150,000 jobs a month to keep pace with population growth.

Whether or not the rapidly weakening job market signals the start of a recession is still a matter of debate. The government defines a recession as two straight quarters of a shrinking economy.

The Commerce Department believes that in the fourth quarter of 2007, growth was a tiny 0.6 percent, but the latest data suggest growth might have come to a complete halt by the end of last year.