WASHINGTON (AP) – Job seekers and workers may finally be getting more bargaining power as employers boost hiring and cut bigger paychecks.

The latest snapshot of the job market showed the unemployment rate sinking in January to 4.7 percent, its lowest level since July 2001. The Labor Department also reported Friday that employees’ average hourly earnings, which had trailed inflation for most workers last year, rose to $16.41 in January, up 3.3 percent in the last 12 months.

“That’s a healthy pickup. The pendulum, which had been fully in favor of employers, is swinging back in favor of employees,” said Mark Zandi, chief economist at Moody’s Economy.com. “Employees are starting to gain traction.”

Wage growth is good for workers and for consumer spending, an important ingredient for the overall economy’s health. But big wage increases – if sustained – would be troubling to investors and economists who fret about inflation.

“The sharp rise in wages is a two-sided sword,” said economist Joel Naroff, president of Naroff Economic Advisors. “On the one hand, workers’ income is finally starting to increase, and that bodes well for spending. On the other hand, labor costs are on the rise and that implies potentially higher inflation.”

To thwart inflation, new Federal Reserve Chairman Ben Bernanke will probably raise interest rates on March 28, analysts said. Some economists think that will be the last rate increases in the Fed’s nearly two-year long credit tightening campaign. Others, however, predict there will be more to come.

On Wall Street, stocks fell as the jobs report fanned fears that the Fed might need to raise rates more this year than investors had previously thought. The Dow Jones industrials lost 58.36 points to close at 10,793.62.

Friday’s report showed that payrolls grew by 193,000 in January, up from 140,000 in December. Job growth for December as well as for each of the months going back to August turned out to be stronger than the government previously reported.

Employment gains were fairly widespread last month. Businesses are feeling better about the economy but good weather also played a role, economists said.

Construction, manufacturing, health care, financial activities and other industries boosted payrolls. That blunted job losses in other areas including retailing, government and broadcasting.

“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.”

Americans have expressed anxiety about the economy, polls indicate.

President Bush, coping with relatively low job-approval ratings, is seeking to ease those fears.

Bush, who welcomed the new jobs figures, spoke Friday 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.

“We want our people working. We want people to be able to realize opportunity and hope. And in order to do that you got to have a growing economy, obviously,” Bush said. “I think keeping taxes low is an important way to make sure this economy continues to grow.”

The president wants Congress to make his tax cuts permanent. Democrats, however, contend that the tax cuts mostly helped the wealthy, did nothing to help the jobs climate and are a big reason why the government’s balance sheets are bleeding red ink.

For all of 2005, the economy created 1.98 million jobs – close to the 2.1 million generated in 2004, according to annual revisions to the payroll figures released Friday. The economy lost jobs in 2001 and 2002 but posted a tiny gain in 2003.

The economy suffered through a brief recession in 2001, starting in March and ending in November. The job market was especially hard hit and had trouble getting back to full throttle.

During Bush’s first term in the White House, job growth turned out to be flat – leaving him open to Democrat attacks about his track record on job creation. The government’s annual revisions wiped out the tiny 119,000 gain in jobs previously reported for Bush’s first term.

“There is still a lot of catching up to do in a labor market that went through the most protracted jobs slump in decades,” said Sen. Jack Reed, D-R.I. “At this point in the last recovery, the economy had created nearly 5 million more jobs than we have seen in this recovery.”

In other economic news:

– The Institute for Supply Management reported that the service sector posted respectable – but slower growth in January. The group’s index dipped to 56.8 from 61.0 in December. A reading above 50 points to growth, while a figure below that signals contraction.

– The Commerce Department said factory orders rose 1.1 percent in December, the third straight monthly increase. For all of 2005, factory orders rose 8.1 percent, down from a 9.7 percent increase in 2004.

AP-ES-02-03-06 1822EST

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