The Labor Department said the economy shed 89,000 nonfarm jobs in January, but the unemployment rate unexpectedly fell to 5.6% from 5.8%. It was the lowest one-month job loss in six months and the first drop in the unemployment rate since May.

Economists, on average, had been expecting 50,000 jobs lost and a rise in the unemployment rate to 5.9%.

The report highlighted strength among retailers, which added 62,000 jobs in the month, partly offsetting declines of 89,000 in the manufacturing sector and 54,000 in the construction sector. The decline among manufacturers was the smallest since September, when the sector shed 85,000 jobs.

Coming the same week as the Commerce Department reported a small but unexpected expansion in fourth-quarter gross domestic product, the jobs report is more evidence that the rate of deterioration in the economy has moderated.

Among the other statistics in the report, factory overtime rose, and this is often a precursor to more hiring; average weekly earnings fell to $496.06 from $497.52 in December; the available labor pool fell to 12.7 million from 12.9 million. The last number counts unemployed job seekers and people who aren't looking for work but who had been in the last 12 months, and who said they would take a job.

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