U.S. employers slashed payrolls in January

Average hourly earnings for jobholders rose to $17.75 in January, a 0.2 percent increase from the previous month. It was half the pace logged in December. Economists were predicting a slightly larger gain of 0.3 percent. Over the last 12 months wages went up by 3.7 percent. With high energy and food prices, though, workers may feel squeezed and feel like their paychecks aren’t stretching that far.

The 17,000 drop was in total payrolls — both government and private employers — in January. The government sliced 18,000 positions, while private employers added just 1,000 jobs.

The drop in payrolls marked a significant deterioration in employment conditions. In December, employers added 82,000 new jobs. January’s decline was the first since August 2003, when the labor market was still struggling to recover from the 2001 recession.

The government on Friday also released annual revisions — based on more complete information — to its payroll data. Those revisions showed job creation was even weaker last year than initially thought.

The economy added an average of just 95,000 jobs per month in 2007, versus an earlier estimate of 111,000 a month for the year. In 2006, payroll employment grew by an average of 175,000 a month.

Construction and factory workers have been especially hard hit by the meltdown in housing and other troubles in the economy.

In January, construction companies cut 27,000 jobs, with most of the decline concentrated in housing. The construction industry has lost a total of 284,000 jobs since its employment peak in September 2006.

Factories eliminated 28,000 positions in January, and have cut 269,000 jobs over the last 12 months.

The economy nearly stalled in the final three months of last year, and some economists believe it may actually be shrinking now.

Under one rough rule, the economy would have to contract for six months in a row for the country to be considered in a recession. The likelihood of a recession has risen sharply over the past year, and analysts increasingly believe the U.S. will be in one during the first half of 2008. The worry is that people and businesses will hunker down and pull back their spending, sending the economy into a tailspin.

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