Key economic indicators

Unemployment down Consumer sentiment up Manufacturing activity up Shares down

Headlining the brighter mood was the news that America's jobless rate had fallen for the first time in eight months as the previously brisk pace of job cuts slowed.

The US Labor Department said the jobless rate declined to 5.6% in January, down slightly from its six-year high of 5.8% reached in December.

The news came as a pleasant surprise to economists, who had predicted a minor rise to 5.9%.

Added to perky results from surveys of manufacturers and consumers, and strong output growth figures earlier in the week, America's post-11-September gloom seems to be evaporating fast.

Room for gloom

The unemployment figures nonethless contained some scope for pessimism.

A gloomier note was given in the overall payroll employment figures, which showed a fall of 89,000 jobs, much more than had been expected.

"It is certainly a mixed bag," said Doug Porter, senior economist at BMO Nesbitt Burns.

"I would regard the headline payroll number as a bit of a disappointment, but I don't think it changes the broader picture that the worst for the economy is over and that we are slowly turning the corner."

Cutting down

Labor Department officials cautioned against reading too much into the news.

January tends to reflect large seasonal movements after the holidays, making the month-on-month comparison occasionally deceptive.

Nonetheless, the data is a further sign that the expected US slump is not proving as severe as feared.

Earlier this week, gross domestic product (GDP) figures showed a surprise rise in output in the fourth quarter, helping the economy avoid falling into a technical recession.

Indexes up...

Just after the unemployment figures, the University of Michigan revealed that its consumer sentiment index had risen for a fourth straight month to its highest level in a year.

The university's final January index, a closely watched indicator for the lively retail sector, surged to 93.0 from 88.8 in December.

And the Institute for Supply Management's monthly Purchasing Managers' Index, a key gauge of manufacturing activity, rose for the third straight month in January.

The index rose to 49.9 in January, just short of the key 50 level mark, but above market expectations for 49.4 and up from December's reading of 48.1.

... but shares sag

According to the logic of such figures, good unemployment news was greeted with dismay by the stock markets, which opened slightly lower in New York.

Investors fear that robust employment will reduce the likelihood of any further cuts in interest rates, and may indeed persuade the Federal Reserve to begin increasing them.

Since unemployment is a lagging indicator, any deeper recovery may have started before the end of last year.