Payrolls shrink, first drop in 4-1/2 years

WASHINGTON (Reuters) – U.S. employers unexpectedly cut 17,000 non-farm jobs in January, the first time in nearly 4-1/2 years that U.S. payrolls shrank as fading construction and manufacturing sectors reflected the economy’s waning momentum.

The Labor Department report on Friday came in much weaker than anticipated by analysts surveyed by Reuters, who had forecast 80,000 jobs would be added last month. The department revised December’s new-job total up to 82,000 from 18,000 but the hiring trend clearly was fading as 2007 ended.

The last time that jobs were cut was in August 2003 when 42,000 were lost.

The national unemployment rate eased to 4.9 percent from 5 percent in December but the number of people in the civilian labor force declined. The unemployment rate is calculated using a separate survey than the one the department uses for measuring the number of payroll jobs added or subtracted each month.

Manufacturers cut 28,000 jobs in January, a 19th straight month of contraction for the sector, while the number of construction jobs dropped by 27,000. The department said construction industries have shed 284,000 jobs since employment peaked in September 2006, largely reflecting the continuing decline in home building.

After holding steady for six months, the average workweek fell to 33.7 hours in January from 33.8 in December, another sign of potential weakening in labor markets.

The private sector added 1,000 jobs in January but 18,000 government jobs were lost.