US jobs growth falls short of predictions

The US jobs market showed only modest improvement in January - another sign that last year's vigorous growth in the economy has slowed, for the time being at least.

The US jobs market showed only modest improvement in January - another sign that last year's vigorous growth in the economy has slowed, for the time being at least.

According to the Labor Department, the economy created 146,000 jobs last month. The figure was the best since October, but below the expectations of most analysts, who had been looking for a payrolls gain of 200,000. It also fell short of the Bush administration's own prediction of an average 175,000 new jobs a month during 2005. The manufacturing sector lost 25,000 jobs in January, the fifth consecutive monthly decline.

Even so, the headline unemployment rate - calculated by a different formula - dropped from 5.4 per cent to 5.2 per cent of the workforce, the lowest rate since September 2001.

The disappointing result boostedUS stocks, as traders speculated that the weaker-than-expected performance could cause the Federal Reserve to raise rates more slowly. This week the Fed raised its key short-term rate for the sixth successive time, to 2.5 per cent, but signalled it would continue to nudge rates higher. This would return them to a "neutral" level, reckoned to be between 3 and 4 per cent. Last year, US GDP climbed 4.4 per cent at an annual rate, but fourth-quarter growth dipped to 3.1 per cent. Most forecasters have lowered their 2005 growth forecast to 3.5 per cent at most.

There is, however, one historical comfort for the President. The January increase means that between February 2001 and January 2005 the economy created a net 119,000 jobs. The four-year improvement is tiny - but it allows Mr Bush to escape the distinction of becoming the first White House occupant since Herbert Hoover to preside over a net loss of jobs during a term of office.