The US jobless rate plunged unexpectedly to 5.7 percent in January, government figures showed Friday, but analysts said employers remained frozen by Iraqi war fears.
Businesses hired an extra 143,000 people, the biggest surge since November 2000, after losing 156,000 in December.
That dragged down the jobless rate from the December level of 6.0 percent, the Labor Department said.
The numbers initially delighted Wall Street traders, who had been expecting the unemployment rate to stick at December's rate of 6.0 percent with a much smaller increase in job creation by businesses.
But early gains on the Dow Jones industrials average of 30 top stocks quickly evaporated. The index fell 65.07 points, or 0.82 percent, to close at 7,864.23.
Economists said the strong January jobless figures were a statistical reaction to exaggerated November-December weakness. The underlying market, they said, was stagnant.
"We have unwound the disaster scenarios of November and December. Beneath it all we have been essentially flat," said Salomon Smith Barney economist Steven Wieting.
More than two-thirds of the January employment increase occurred in retail trade, where a job gain of 101,000 offset a large decline in December, according to the numbers, adjusted for seasonal blips.
Construction jobs rose 21,000 in January, while government jobs advanced 4,000 and employment in the services sector shot up 35,000.
But manufacturing jobs fell 16,000 in January -- the 30th consecutive monthly drop -- after plunging 80,000 in December.
"Unemployment did fall, but the president believes that there is more to do," said Scott McClellan, a spokesman for US President George W. Bush.
"He is not and will not be satisfied as long as there are Americans that want to work and cannot find work."
Manufacturing has lost 2.4 million jobs since April 1998.
The factory workweek was shortened by six minutes to 40.8 hours in January. Overtime in the manufacturing sector, meanwhile, fell by six minutes to 4.1 hours.
"The production outlook, which has been weak since Iraq has been a big concern, continues to stay very weak here," Wieting said.
"I think a better employment outlook, rather than flat, will have to await the alleviation of these war concerns."
Overall, US hourly earnings rose 0.3 percent in January, in line with Wall Street's expectations. They were also up 2.7 percent from the same month one year earlier.
The average workweek rose by six minutes to 34.2 hours.
Average weekly earnings increased by 0.3 percent to 512.32 dollars, up 3.0 percent from the same month a year earlier.
"The report is not as exciting as it looks on the surface," said Sung Won Sohn, chief economist at Wells Fargo. "Some of it is mirage, courtesy of seasonal adjustments."
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