Maine news, sports, weather from Portland Press Herald / Maine Sunday Telegram, Portland, Maine

Jobless rate last month the lowest in three years

The market surges, with the Dow rising 156 points to 12,862, its highest since the spring of 2008.

By DON LEE McClatchy Newspapers

WASHINGTON - An unexpected burst of job growth last month helped drive down the unemployment rate to its lowest point in three years, raising hopes that the long-sluggish labor market is gaining momentum despite significant challenges to the economy.

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President Obama talks about the latest national economic reports during an event at Fire Station 5 in Arlington, Va., Friday.

The Associated Press

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The government reported that the nation's unemployment rate fell to 8.3 percent in January, the fifth consecutive monthly decline, and that employers added 243,000 net new jobs last month -- about 100,000 more than what analysts had forecast and the most in nine months.

Some economists cheered Friday's report, calling it a strong signal of better times ahead for American workers.

Other analysts were more cautious, noting that job growth was inflated by the unseasonably warm weather -- construction reported sizable gains, for instance -- and that the outlook remains constrained by government cuts, financially strapped consumers and a slowing global economy.

"This is a great surprise," said Heidi Shierholz, an economist at the Economic Policy Institute. "It was out of context with other things we've been seeing" in the economy, "so we can't be confident that this is the new state of things."

And Federal Reserve Chairman Ben Bernanke had described the recovery as "frustratingly slow" in congressional testimony Thursday.

Nevertheless, stocks surged on the news, with the Dow Jones industrial average rising 156 points to 12,862, its highest since the spring of 2008.

The broad-based gains in new jobs reflected robust increases in manufacturing as well as solid additions in professional and business services, such as accounting and engineering, and in the leisure and health care industries.

The unemployment rate was down from 8.5 percent in December and 9.1 percent in August.

In Maine, the unemployment rate for December was 7 percent, down from 7.5 percent in December 2010 and unchanged from November.

The state won't report January employment data until mid-March due to a more comprehensive count of jobs that the Maine Department of Labor conducts each winter.

There were 48,700 people unemployed in Maine in December, down 3,800 from a year earlier. Cumberland County had the lowest unemployment rate -- 5.3 percent -- and Somerset County had the highest at 9.8 percent. The county unemployment rates, unlike the statewide figures, aren't adjusted for seasonal fluctuations in job availability and the labor force.

The Labor Department announced this week that Maine has been removed from a federal list of high unemployment states. While that suggests an improvement in Maine's labor markets, it also means that unemployed workers are no longer eligible for a federal program that extends benefits for 13 weeks after regular benefits and the federal Emergency Unemployment Compensation programs are exhausted.

News of the national numbers was welcomed by the Obama administration.

Labor Secretary Hilda Solis insisted that the improvement wasn't a one-month aberration but a trend that had been building for some time. Like others in the administration, Solis used the occasion to make a case for extending the payroll tax cuts and emergency jobless benefits beyond their scheduled expiration at the end of this month.

There were 12.8 million unemployed workers in January, with 43 percent of them jobless for more than six months. That's an unusually high percentage that raises serious questions about their employability because skills tend to erode over time.

Analysts said the economy needs to create at least 100,000 net new jobs a month just to keep pace with the growth in the work force population. The nation lost, on average, about 360,000 jobs a month in 2008 and 2009.

Officially, the recession ended and the economy began recovering in June 2009, but it wasn't until March 2010 that the nation began adding jobs. With January's increase, U.S. payrolls stand at about 5.6 million below what they were at the start of 2008.

But job growth has been picking up slowly since last summer. And Friday's report showed that there was stronger hiring at the end of last year than previously thought.

Officials said employers added 157,000 jobs in November, compared to the 100,000 initially estimated. Job growth in December was revised slightly higher to 203,000 and was more broad-based than was previously indicated as government statisticians, using more complete records, erased the unusually big gains in messenger jobs and added payrolls in other categories.

Office jobs such as accounting and bookkeeping are growing because companies are doing well and they need business services, said Patrick O'Keefe, economic research director at J.H. Cohn, an accounting and advisory firm.

But he said that's not the case with consumers, many of whom remain heavily indebted and have seen their incomes and wealth hurt by weak pay increases and the depressed housing market.

Businesses won't aggressively beef up hiring unless they are confident that they will see stronger demand, he said.

And even then, many companies don't have to hire as many people because they can use temporary workers or add hours for the 8.2 million part-time employees who want full-time hours.

"Employers have a need for labor, but they're tentative in their long-term commitment," he said. "They want a date but don't want to get married."

Staff Writer Edward D. Murphy contributed to this report.