THE US created far more jobs than expected in January and the unemployment rate dropped to a near three-year low of 8.3 per cent, delivering a jolt of good news for the global economy and President Barack Obama’s re-election prospects.

The US added 243,000 new jobs, higher than Wall Street expectations of about 140,000 and the strongest monthly figure since last spring.

The figures capped a week of positive indicators, leading economists to revise their view of the momentum in the global economy even as they remain concerned about the euro zone.

“There can be no doubts over the positive nature of this report,” said David Sloan, economist at IFR Economics. “There is only one obvious significant caveat – an unusually mild winter restricting the number of seasonal lay-offs, which are always heavy in January.”

Investors welcomed the surge in payrolls, triggering a rally on Wall Street. The Nasdaq Composite Index hit an 11-year high and the SP 500, the broadest stock measure in the US, extended its advance this year to almost 7 per cent. The index has already rebounded 21 per cent from a cyclical low in October.

“The year is off to a great start,” said Chris Rupkey, senior US economist at Bank of Tokyo-Mitsubishi. “The expansion from the end of the 2007-2009 recession is on track. It isn’t going to go off the rails. In fact, activity is accelerating into the new year.”

Robust growth was recorded across a range of sectors, including manufacturing, healthcare and services.

Activity in services reached an 11-month high globally, according to purchasing managers’ indices from the leading economies, with companies reporting marked increases in new orders and in their intentions to hire new staff.

“Given current events, it now seems even more likely that the worst is behind us,” said Francois Cabau of Barclays Capital.

Although a range of US data now point to resilient job creation, the January figures also saw an upwards revision of the US population, by 1.5 million.

That dragged down the labour force participation rate – the percentage of people who are either working or looking for a job – from 64 to 63.7 per cent, its lowest level since 1983.

The fall suggests many people are retiring or abandoning job searches.

“The January jobs report shows the economic recovery has traction, but job growth must be sustained closer to 300,000 for the Fed to move off its theme of better, but not good enough,” said Eric Green at TD Securities in New York.

The Federal Reserve recently said it expected to keep interest rates exceptionally low into late 2014.

“We still have a long way to go before the labour market can be said to be operating normally,” chairman Ben Bernanke told congress this week.

The Obama administration welcomed the report.

“We need to extend the payroll tax cut and continue to provide emergency unemployment benefits through the end of this year, and . . . create an economy built to last,” said Alan Krueger, chairman of the council of economic advisers. – (Copyright The Financial Times Limited 2012)

SHRINKING SECTOR: SERVICES ON DECLINE

THE IRISH services sector shrank in January for the second consecutive month, and employment fell at the fastest pace in almost two years.

But the pace of contraction in new orders moderated, for the month, the NCB services Purchasing Managers’ Index showed.

The overall index fell to 48.3 last month, from 48.4 in December. Employment in the sector showed further deterioration, as the index fell to 44.5 from 47.3, the sharpest decline since April 2010.

“Within our sample, 24 per cent of respondents lowered staffing levels, while only 9 per cent raised them,” said NCB chief economist Brian Devine.

“The only sector with an overall positive employment reading in the month was technology, media and telecoms.”

There was some cause for optimism. Although new orders showed a fall, the decline was marginal, with the index reading 49.7 compared with 47.4 a month earlier. And new export orders continued to rise, from 52.1 to 52.8. Confidence was also higher, with sentiment rebounding from a 13-month low recorded in December. "Anecdotal evidence suggested that optimism partly reflected expectations of new order growth, with particular focus on external markets" NCB said. – CIARA O'BRIEN