U.S. payrolls unexpectedly fell in January, but the unemployment rate surprisingly dropped to a five-month low, according to a government report Friday that hinted at labor market improvement.
The Labor Department said the economy shed 20,000 jobs after losing 150,000 jobs in December. November was revised to a gain of 64,000, up from 4,000. Annual benchmark revisions to payrolls data showed the economy has purged 8.4 million jobs since the start of the recession in December 2007.
"Even as today's numbers contain signs of the beginning of recovery, they are also a reminder of how far we still have to go to return the economy to robust health and full employment," said White House economic adviser Christina Romer.
"The economy is moving slowly and it takes time for companies to turn around from where they were to where they are going," said Torsten Slok, senior economist at Deutsche Bank in New York.
Analysts speculated the decline in the unemployment rate could see the Federal Reserve raising interest rates sooner than expected.
Financial markets have grown nervous about the prospect of unemployment in the United States remaining high for a long time. The economy resumed growth in the second half of 2009 and labor market healing is crucial for a self-sustaining economic recovery to take root.