By Leigh Strope
The Associated Press
WASHINGTON - The nation's unemployment rate fell to 5.6 percent in January, the lowest level in more than two years, as employers stepped up hiring - but not at a brisk enough pace to ease concerns about the prolonged job drought.
Job growth is expected to be a key issue as November's presidential election nears. The economy has lost more than 2 million jobs since President Bush took office, the worst job creation record of any president since Herbert Hoover.
January's unemployment rate declined 0.1 percentage point to the lowest level since October 2001, when it was 5.4 percent. Last month's rate matched the 5.6 percent posted in January 2002, the Labor Department reported Friday.
Companies added 112,000 new U.S. jobs overall, marking the fifth straight month of payroll gains and the largest in three years. But economists had expected a larger increase of 150,000 new jobs or more.
"It is not disastrous news, but it is definitely disappointing," said Bill Cheney, chief economist at John Hancock Financial Services.
The report sent stocks sharply higher on Wall Street. The Dow Jones Industrial Average gained 97.48 to 10,593.03, while the Nasdaq Composite Index climbed 44.45 to 2064.01 and the Standard & Poor's 500 Index added 14.17 to 1142.76.
Analysts are looking for monthly payroll gains of 300,000 or more for sustained job growth, and the economy remains far from that mark.
About 8.3 million people were unemployed in January, with the average duration of 19.8 weeks without work.
In the past five months, 366,000 jobs have been added. That includes an upward revision of job growth in December, from 1,000 to 16,000.
Hiring by retailers and construction companies accounted for much of the overall increase in payrolls in January. Factories continued shedding jobs for the 42nd month in a row, although at a slower pace than in previous months.
Some economists think job growth is occurring in the U.S. economy, but it is not reflected in the Labor Department's monthly survey of business payrolls. In the separate survey of households, which determines the jobless rate, employment jumped by 496,000 last month.
The household survey counts self-employed workers and contract workers, which are increasing. The survey of businesses does not.
"They're not recording the outside contractors - they're not reflecting something that is tremendously fundamental now to the American corporate scene, and that's outsourcing," said Ken Mayland, president of ClearView Economics.
Businesses are being squeezed by intense competition from other countries and soaring health care and pension expenses. They are outsourcing and shipping jobs overseas.
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