updated 2/3/2006 1:04:32 PM ET 2006-02-03T18:04:32

Employers stepped up hiring in January, boosting payrolls by 193,000 and lowering the nation’s unemployment rate to 4.7 percent, the lowest since July 2001.

Major Market Indices

The fresh snapshot of the jobs climate, released by the Labor Department on Friday, suggested that the economy started the new year on fairly good footing.

Although the 193,000 gain in payroll jobs in January fell short of the 250,000 new jobs that economists said to anticipate before the release of the report, it still marked a sturdy showing and was the biggest increase in jobs since November.

“There’s no question we’re getting back to better days for job creation,” said Ken Mayland, economist at ClearView Economics. “There’s been a sense of unease in the American workplace and this should help relieve that. The economy is getting on off to excellent start in 2006.”

Moreover, job growth in December turned out to be stronger than previously thought. Revised figures showed payrolls expanded by 140,000 — an improvement over the 108,000 new jobs first estimated a month ago. Employment was revised up for some previous months as well.

The unemployment rate dropped to 4.7 percent in January, from 4.9 percent in December.

On Wall Street, stocks fell as investors worried the Federal Reserve might raise rates this year more than they had previously thought. The Dow Jones industrials were off 46 points and the Nasdaq was down 19 points in morning trading.

President Bush welcomed the new jobs figures.

“We’ve overcome a lot,” Bush said. “I really ascribe that to that, mainly, the entrepreneurial spirit of American is strong. The small business sector is strong. I do happen to think good tax policy helps. I think keeping taxes low is an important way to make sure this economy continues to grow.”

In another report, the Commerce Department said that factory orders rose by 1.1 in December, a good sign that manufacturing was off to a strong start in the new year.

This improvement followed an even higher 3.3 percent gain in November and marked the third straight month where new bookings to factories went up. December’s performance was in line with the 1 percent increase in factory orders that economists were forecasting before the release of the report.

For all of 2005, factory orders rose 8.1 percent. That followed a gain of 9.7 percent in 2004.

Job gains were fairly broad based, with employment growing in construction, manufacturing, professional and business services and education and health care. Those employment gains blunted job losses in retailing and government.

For all of 2005, the economy created nearly 2 million jobs — close to the number posted for 2004, according to annual revisions.

In New York, the Institute for Supply Management reported that the service sector grew in January but at a slower pace than the previous month. Its index dipped to 56.8 from 61.0 in December. The new figure was lower than the 60 reading forecast by analysts.

A reading of 50 and above points to a growing service sector, while a figure below that signals contraction. January marked the 34th consecutive month of growth for the service sector, ISM said.

Despite good news on some economic matters, Americans still feel anxious about the economy, polls indicate.

Bush, coping with relatively low job-approval ratings, is seeking to ease those fears. In his State of the Union address as well as subsequent speeches Bush has been talking about ways to make the country more competitive and is pushing plans to deal with pocketbooks issues, such as high energy prices and rising health care costs.

Bush also is calling on Congress to make his tax cuts permanent. Democrats, however, contend the tax cuts mostly helped the wealthy and are a big reason why the government’s balance sheets are bleeding red ink.

Employees’ average hourly earnings climbed to $16.41 in January, up 0.4 percent from December. That increase was slightly larger than the 0.3 percent rise that economists were expecting.

While wage growth is good for workers, a big pickup if sustained — would be troubling to investors and economists who fret about inflation.

To fend off inflation, the Federal Reserve on Tuesday boosted a key interest rate to its highest point in nearly five years. New Federal Reserve Chairman Ben Bernanke will decide the next rate move at the Fed’s next meeting, March 28. Many economists believe another rate increase is likely to come then.

Mayland said he believes the pickup in workers’ wages should help support consumer spending, a key shaper of overall economic activity. Retailers reported Thursday that they rang up better-than-expected sales in January. Mayland predicts the economy, which grew by an anemic 1.1 percent rate in the final quarter of last year, is rebounding smartly in the January-to-March quarter.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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