The Labor Department said Friday that January unemployment fell to 8.3 percent as employers added 243,000 jobs, a sign that the economy is at long last settling into a stronger recovery.
Economists had expected the unemployment rate to tick up slightly to 8.6 percent and jobs would rise by 155,000. The fifth straight monthly decline for unemployment caused a surge in stocks, with the Nasdaq index at an 11-year high and the Dow Jones Industrial Average approaching its highest level since May 2008.
Stephen Bronars, chief economist with Welch Consulting, said the "very strong" report gives reason for optimism.
The Dow passed 12,869 late morning, shy of the 12,876 level reached in May 2008.
"This is the best jobs report we have had in years because there were solid gains in many areas," he said. "We need job growth this strong over a sustained period, 24 months, to get employment as a fraction of population close to pre-recession levels."
The primary weakness is that employment growth is still lagging for workers with a high school diploma and those who didn't finish high school, according to Bronars. He is also concerned by the 5.5 million long-term unemployed.
"That number has come down substantially, but it is still quite high by historical standards," he said.
The economy has become a major issue in the presidential election set for November. The Republican candidates have criticized the Obama administration for doing too little to spur job growth.
"We welcome the fact that jobs were created and unemployment declined," GOP frontrunner Mitt Romney said in a statement this morning. "Unfortunately, these numbers cannot hide the fact that President Obama's policies have prevented a true economic recovery. We can do better."
"Last week, we learned that the economy grew only 1.7 percent in 2011, the slowest growth in a non-recession year since the end of World War II. As a result, the percentage of Americans in the job market continues to decline and is now at a level not seen since the early 1980s. Nearly 24 million Americans remain unemployed, underemployed, or have just stopped looking for work. Long-term unemployment remains at record levels."
House Speaker John Boehner suggested that despite the positive jobs data, the president's economic agenda has failed and the country would be better off if the GOP's policies are implemented.
As usual, business and professional services and health care were strong, but this month the job gains were strong across many sectors. However, January is usually a difficult month to evaluate because of strong seasonal effects, Bronars said.
"Obviously, any time we're adding jobs, that's a good thing," Bronars said. "The more jobs gained above 150,000 per month, the more we have an indication the economy is picking up steam. We need some acceleration in growth, rather than moving along at the same rate we have been."
In the days leading up to the release of the new Labor Department figures Friday, ADP, the payroll processing company, released its monthly employment figure, showing an increase of 170,000 private sector jobs in January.
"Over the last three months, the monthly gains in employment shown in The ADP National Employment Report have averaged 223,000, compared to 163,000 per month over all of 2011," said Carlos Rodriguez, president and CEO of ADP in a statement. "This is a positive development that we hope will continue throughout the course of 2012."
A Holiday Blip?
That average increase in jobs, however, may be inflated due to a good holiday season at the end of 2011. The December jobs report, released last month, saw the unemployment rate decline to 8.5 percent, the lowest since February 2009, with a better-than-expected increase of 200,000 new jobs.
"December was about 100,000 above the other two [months] in the ADP report, so if we discount December, which may be off due to seasonal factors, the last two months averaged 190,000" new jobs, said Bronars. "If we weren't coming out of a recession where 8.8 million jobs were lost, adding 190,000 [jobs] would be a solid monthly gain," he continued. "In our current situation, it is good, but not great."
Reading the Latest Employment Tea Leaves
Applications for unemployment benefits for the week ending Jan. 14, dropped by 50,000, the steepest decline in six years, according to the Labor Department .
While it is clear that employment has been growing steadily, compared to previous recoveries, the pace is much slower, Bronars said.
"It's frustrating because the stock market, GDP comeback and employment is growing but we lost a lot of jobs and only regained a small fraction of what was lost," he said. "We are still trying to dig ourselves out of this downturn in the labor market and that's the thing holding us back."
Can Facebook Help?
"The number of people who work at Apple in the U.S. is just not enough to make a dent in the problem here," said Bronars. "If you have the skills that companies in the tech sector are looking for – the designers or software engineers—it's been a pretty good job market all along."
Meanwhile, he said, jobs in manufacturing and construction have yet to come back.