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By Jennifer Yousfi
Recession fears were fueled once again as a decline in U.S. jobs for January suggested the economy was weakening further. The news was especially troubling as consumer spending and strong employment have been the main hopes for skirting a recession.
The U.S. Department of Labor released its Employment Situation Summary for January 2008 on Friday. Despite the 17,000 decrease in non-farm payrolls for the month, the unemployment rate remains at 4.9%. The slight change reflected declines in manufacturing and construction jobs, partially offset by slight growth in the health care field.
But Joel Naroff, president and chief economist at Naroff Economic Advisors, is quick to remind us that job numbers are notorious for being revised. "This was a disappointing report but we should not over react to it," he said in a note to clients. "First of all, the soft December payroll number, which really triggered so many of the ‘recession is here’ stories actually turns out to have been quite good."
"What the January number will look like in one month is anyone's guess," Naroff added.
In fact, total jobs created for December were revised up to 82,000 from 18,000. A similar upward revision occurred in August 2007, when an initial decline was later revised to a sizeable gain. Still, the jobs report was far from good with the financial and real estate sectors also showing declines.
"The economy is very weak. It's on the edge of recession but the data are mixed enough so that you can't say a recession has begun," Stuart Hoffman, chief economist for PNC Financial Services in Pittsburgh, told Reuters. "It's hanging by a thread but it hasn't been cut yet."
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