WASHINGTON — Breaking a four-year string of growth in hiring, employers shed jobs in January, the clearest sign yet that the U.S. economy is nearing a recession, if not already in it.
The Labor Department reported Friday that the nation's unemployment rate dropped a hair to 4.9 percent in January. But non-farm payroll employment fell by 17,000 jobs, led by declines in construction, manufacturing and even health care, which until recently had been one of the few growth sectors for employment.
The last time employment turned negative was in August 2003, and Friday's poor jobs numbers follow economic growth data earlier this week that showed that the economy grew by a scant 0.6 percent in the last three months of 2007.
Not all of the news in the Labor Department report was bad. Not only did the unemployment rate fall from 5 percent in December to 4.9 percent in January, statisticians revised upward the weak December jobs data, which had shown 18,000 new jobs. December employment actually grew by 82,000 jobs, still subpar growth but far better than the first estimates.
Together, however, these statistics point to a U.S. economy that's stalled or could be shrinking.
"We're not happy with these numbers," Commerce Secretary Carlos Gutierrez said in an interview. Nonetheless, he discounted recession concerns and predicted a rebound in the second half of 2008. "We believe we're going to continue to grow, but our growth will continue to slow."
Coming amid a tough presidential election campaign, the job numbers immediately were fodder for partisan purposes. President Bush toured a Hallmark greeting card plant in Kansas City, Mo., on Friday and said that the numbers underscored the need for the Senate to pass the $150 billion economic stimulus plan that he supports. The measure, which the House of Representatives has passed, includes tax rebates of up to $600 for most Americans and tax relief for employers.
Bush urged the Senate to act quickly next week because "the sooner we can get money into our consumers' hands, the more likely it is that this economy will get back, recover from this period of uncertainty."
But Senate Democrats want to add more direct aid for seniors and the poor and to extend unemployment benefits by 13 weeks. On Friday, they sought to score political points from the job losses.
"Even though unemployment didn't rise last month, we see from the establishment survey that the economy hasn't created new jobs in two months. ... More people are going to have difficulty finding a job," said Sen. Charles Schumer, D-N.Y., during a Joint Economic Committee hearing, which he scheduled for minutes after the new jobs numbers were released.
Schumer summoned Keith Hall, the commissioner of the Bureau of Labor Statistics, to explain Friday's numbers and questioned him like a prosecuting attorney.
Asked whether the jobs data mean a recession, Hall cautioned that "there have been periods in expansion where there has been a pause like this," and he warned against reading too much into a single month's data.
Schumer responded: "It seems clear to me, at least, that's where the data shows we're headed."
Hall later conceded that the last recession, which lasted nine months, began in March 2001 and was accompanied by a jobs contraction that month.
Still, Bush noted Friday that "the fundamentals are strong — we're just in a rough patch."
Friday's weak jobs numbers give credence to Federal Reserve Chairman Ben S. Bernanke's bold moves to knock down the Fed's benchmark lending rate by an unprecedented 1.25 percentage points over an eight-day period in late January. Critics accused him of knuckling under to pressure from Wall Street after steep stock market slides, but the recent growth and employment data show a tepid U.S. economy that needs a spark from lower interest rates.
Most mainstream economists now put the odds of a recession at 50 percent or better. But not all indicators point to a downturn. Business investment is up, non-residential construction is healthy and durable goods orders have increased.
There also was encouraging data Friday from the Institute for Supply Management. Its index of manufacturing activity rose to 50.7 from a December reading of 48.4. Any reading above 50 indicates a stable manufacturing environment.
The Manufacturers Alliance/MAPI, an industry trade group, said Friday that it expected manufacturing of consumer goods to contract. But chief economist Dan Meckstroth said production of capital goods and exports "should cushion the downturn."
Aided by a weakening U.S. dollar, exports for much of the year offset the housing sector's deep slump. But in the fourth quarter of 2007, exports accounted for less than half a percentage point of economic growth.
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The BLS report on January employment.