Business / Technology

An unexpectedly rosy jobs report set off a chain reaction Friday, upending economists' gloomy predictions for this year, triggering a Wall Street rally and potentially boggling the political calculus of the 2012 presidential campaigns.

The Labor Department's latest snapshot of the job market makes clear that employers have been hiring more in recent months, with a better-than-expected 243,000 net new jobs in January, even after accounting for losses of 14,000 government jobs. The unemployment rate is 8.3 percent, down from 8.5 percent a month earlier and 9.1 percent as recently as August.

The report also revealed additional job gains for previous months. December job growth was revised to 203,000, from the original 200,000. November job gains, originally reported as 100,000 jobs, were revised upward to 157,000.

The Dow Jones industrial average soared to its highest mark since the beginning of the financial crisis months before President Obama took office, and the tech-heavy Nasdaq hit an 11-year high.

By noon, Obama, whose re-election chances have been threatened by the nation's economic woes, seized on the figures as proof that the recovery from the recession "is speeding up."

The report also forced his presidential rivals to adjust their rhetoric about the economy, which has played a leading role in Republican debates. But they still reminded listeners that the unemployment rate remains elevated.

What lies ahead is far from clear. Even the more optimistic economists note another downturn in Europe, oil-price spike, debt showdown or some other unexpected shock could derail the momentum.

"This is a game-changer"

But the Friday report clearly depicted an economy that is gaining traction.

The number of jobs in the past three months has increased at a monthly average of more than 200,000, and they're appearing across the economy, signaling a broad recovery. Manufacturing added 50,000 jobs, the most since 1998, and professional and business services — many of them well-paid white-collar jobs — posted the largest gain in Friday's report, 70,000 new jobs. Even the hard-hit construction sector, with 21,000 jobs, improved.

"It is a fantastic jobs report, not a single blemish," said Mark Zandi, chief economist for Moody's Analytics, a forecasting and consulting firm. "Jobs were up big, and unemployment was down big. All the leading indicators in the report suggest continued solid job growth at least into the spring."

The stop-and-start economic recovery has shown tentative signs of unanticipated strength in recent months, and Friday's report lent credibility to a bullish view, some economists said.

"This is a game-changer," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "The payroll numbers validate, in the market's eyes, what all the other data are saying."

The nation's economic forecasters, many of whom had predicted the unemployment rate would remain stubbornly high this year, seemed to back off their positions.

The Congressional Budget Office has predicted 8.9 percent unemployment for the year; the Federal Reserve has predicted between 8.2 and 8.5 percent. Likewise, Moody's Analytics had expected the unemployment rate to be at 8.5 percent at the end of the year.

Moody's Analytics, for one, now is reconsidering its predictions.

"The collective psyche seems to be turning a bit more optimistic," said Marisa Di Natale, the firm's director of economic research. "We're certainly going to revise our forecast."

The unemployment figures were startling enough that some analysts wondered whether they were correct. Friday's figures from the household survey were the first to incorporate the new population numbers from the 2010 Census. But the new jobless rate was unaffected by the change, Labor Department officials said.

Political implications

The economy has been central to the presidential campaign rhetoric, with Republican candidates chastising the Obama administration for failing to pull the country out of the recession more quickly.

Even with the new jobs figures, a central point of their attack remains unblunted: The unemployment rate still exceeds 8 percent.

"Unfortunately, these numbers cannot hide the fact that President Obama's policies have prevented a true economic recovery. We can do better," former Massachusetts Gov. Mitt Romney said.

Former House Speaker Newt Gingrich, asked on CNN whether Obama deserves credit for the lower rate, scoffed: "Give him some credit. If it makes you happy, give him some credit."

Voters' opinions of Obama are sharply polarized, much as they were for President George W. Bush in 2004. Gallup polls over the past year indicate the majority of voters appear to have their minds made up about Obama. As a result, about 10 percent of voters seemingly will decide his fate.

Obama's campaign team, and some political scientists, believe those voters are more likely to be swayed by the direction the unemployment rate is moving — downward — rather than its exact level.

Lynn Vavreck, an associate professor of political science and communications at UCLA, has studied the effect of gross domestic product and the unemployment rate on presidential campaigns going as far back as 1952.

Her analysis shows there appears to be little or no connection between an incumbent president's vote share and the unemployment rate. But there is a clear connection between votes for the incumbent and the direction the unemployment rate is moving.

"Is it good that the unemployment rate is dropping for Obama? Yes, it's good," Vavreck said. "Does it matter what it drops to? No. That's actually pretty irrelevant."

Said an Obama campaign official: "The trend since this president took office is what's most significant. It's the story over time as the president has taken action to address the historic economic challenges he faced when he came into office."

Compiled from The Washington Post, the Tribune Washington bureau, The New York Times and McClatchy Newspapers