US economy faces payroll decline

For first time in four years, the US economy lost jobs. This may encourage Fed to drop rates again.

According to the Labour Department report out 1 February, the US lost 17,000 jobs in January. This drop was unexpected since some 82,000 jobs were gained in December of 2007.

As a key number, economists are concerned more so than before about the US falling into a recession. Employment is one of the strongest indicators of a recession or economic health. This, along with production, wages and sales are indicating factors of a downturn.

According to some economists, it is uncommon to see a drop in payrolls unless the country is in recession. Jobs were lost in state governments, in construction and manufacturing industries. Small increases were seen in education and healthcare.

The jobless rate in the US moved to 4.9 per cent in January, which is down from 5.0 per cent of December.
Some believe that this recent worrisome number will present another opportunity for the Federal Reserve here to cut interest rates, though this will not likely happen until the March meeting.

In terms of income, the US saw only a 0.5 per cent rise in personal income in December, with 0.4 per cent rise in November. Spending, also a concern for the current economic state, rose, but just slightly. The rise was just 0.2 per cent in December. This was much lower than the rise in November of 2007 of 1 per cent.

As inflation is not of a concern, but spurring the economy is, it is likely that the Federal Reserve will again cut interest rates by the 18 March meeting.