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Risks Remain Despite Rosy Jobs Numbers, Researchers Warn

Friday, 03 February 2012 11:45 AM

Unemployment rates in January may have dropped well below expectations, but the country shouldn't cry victory over a weak economy yet but should remain cautious, experts and researchers say.

The Labor Department reports that the economy added a net 243,000 nonfarm payrolls to the economy in January, which brings the unemployment rate to 8.3 percent from 8.5 percent, numbers that outperformed expectations.

"The strengthening in the January payroll count could stoke expectations that economic growth is accelerating, but we remain cautious," says Kathy Bostjancic, director for macroeconomic analysis at The Conference Board.

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"Consumer confidence, income, and spending remain lackluster and while hiring may be picking up, the paychecks that go with it are not," Bostjancic, of the non-profit, non-partisan business membership and research group, told the Wall Street Journal.

Repeat performances in the labor market will be needed for months to come if the economy is to really surge ahead.

"For this to mark an upturn in the labor market, then businesses will have to continue to hire on this scale throughout the winter. If that unfolds, it would be a great start to the new year, provided the volatile pattern of growth seen over the past three years finally gets muted."

Other experts agree that while the jobs figures were a welcome surprise, the champagne needs to stay on ice.

The Federal Reserve just days ago said interest rates would likely need to stay low and accommodative through the end of 2014 to help a fragile economy recover.

"No doubt this is an extremely strong report and nobody will dislike it. The back revisions indicate the economy was stronger than expected. Overall a healthy report," says Andrew Wilkinson, chief economic strategist at Miller Tabak, according to Reuters.

"Having said that, this should not change the Fed's view as it is one month's report. Certainly the Fed will welcome it, but they remain worried about other areas of the economy, namely housing. This should not change its view on the economy."

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Friday, 03 February 2012 11:45 AM
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