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February 10, 2003
Unemployment Dropped in January, But...
The
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unemployment rate unexpectedly fell to 5.7 percent in January, though economists caution that the gains appear to be on paper only.

The jobless rate dropped 0.3 percentage point from the 6 percent posted the previous two months, the Labor Department reported Friday. That was the largest one-month drop in nearly five years, according to the Associated Press.

While the new report appeared to offer good news for job seekers, the AP said statistical quirks overstated January's gains in hiring.

"I don't think anyone is taking any solace in this," said Mark Zandi, chief economist at Economy.com. "The average American out there knows how bad the job market is. They don't need the unemployment report to tell them otherwise."

Most of the new hiring in January occurred in the retail sector, with 101,000 positions added after 99,000 were cut in December. But since holiday hiring was well below normal, there were fewer seasonal workers laid off in January. Hence, seasonal adjustments accounted for January's large gain, economists told the AP.

"The big swing of 101,000 jobs in January was statistical, not real," said Joel Naroff, president and chief economist of Naroff Economic Advisors.

The surprise drop in the unemployment rate also doesn't appear to reflect the true jobs market, analysts said.

The Labor Department, which computes the monthly rate based on information collected in a survey of households, has changed some of its methodology. Therefore, comparisons of January's rate with December's, which was derived using the old methods, cannot be made, department officials said.

Economists still think the unemployment rate will continue to rise in coming months. That's because businesses are wary of making big commitments in hiring and spending in the face of a possible war with Iraq and a nuclear standoff with North Korea.

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