NEW YORK (AP) — An unexpected drop in the unemployment rate propelled the Dow Jones industrial average Friday to its highest close since before the 2008 financial crisis. The Nasdaq composite index hit an 11-year high.
The Dow jumped 156.82 points to 12,862.23, its highest mark since May 19, 2008, about four months before Lehman Brothers investment bank collapsed.
Before the market opened, the Labor Department said the economy added 243,000 jobs in January. It was the strongest job growth in nine months. The increase in hiring pushed the unemployment rate down to 8.3 percent, the lowest since February 2009.
"In this economy, only one variable matters right now, and that variable is employment," said Lawrence Creatura, an equity portfolio manager at Federated Investors. "This report was great news. It was beyond all expectations, literally. The number was higher than even the highest forecast."
The surprising data gave financial markets a morning jolt that lasted throughout the trading day. The Nasdaq index closed 45.98 points higher at 2,905.66, its highest since December 2000, during the steep decline that followed the dot-com stock bubble.
The price of ultra-safe Treasury notes dropped, sending yields higher, and the price of oil rose for the first time in a week.
The Standard & Poor's 500 index added 19.36 points, or 1.3 percent, to 1,344.90, its highest close since last July. The S&P 500 surged 2.2 percent for the week, its fifth straight week of gains. That's the longest weekly winning stretch since January of 2011.
More evidence that the economy is gaining strength followed the jobs report. A trade group said the service industry expanded at the fastest pace since last February. The government also said factory orders rose 1.1 percent in December, supported by a rebound in orders for heavy machinery.
The private sector remained the engine of the job gains, adding 257,000 net new jobs while federal agencies and local governments continued to lay off workers.
Economists were encouraged by the broad-based increases in private sector employment. The industries with the biggest gains were manufacturing, professional and business services, and leisure and hospitality.
Seasonal factors may have affected some industries, like restaurants or construction, that showed strong hiring numbers in January.
Nevertheless, said Steve Blitz, senior economist for ITG Investment Research, the Labor Department report exhibited strong gains in both manufacturing and related job categories, like transportation and warehousing and wholesale trade.
"You've got to give credit when things are moving in the right direction," said Blitz, who has been cautious in his assessment of the recovery. "This is not a process that is going to be done in a month or two months or a year. It could take five or 10 years to get there, but what you're going to continue to see is what is inside this report, which is the manufacturing sector is improving."
Friday's report also gives a cause for optimism as the economy shapes up as the central issue in the presidential election.
Measured by both the unemployment rate and the number of jobless — which fell to 12.8 million — it was the strongest signal yet that an economic recovery was spreading to the jobs market. The last time the figures were as good was February 2009, President Barack Obama's first full month in office.
The White House used the new numbers as a platform to appeal for an extension of the payroll tax cut and unemployment benefits. Obama, speaking at a Washington-area firehouse to promote a jobs initiatives for veterans, warned that more help was needed and called on Congress to aid with the economic recovery.
"These numbers will go up and down in the coming months, and there's still far too many Americans who need a job or a job that pays better than the one they have now," he said. "But the economy is growing stronger, the recovery is speeding up, and we have got to do everything in our power to keep it going."
From the Republican side of the aisle, the House majority leader, Eric Cantor, welcomed the "encouraging" numbers but said there was still a need for "bold, pro-growth policies that reduce red tape and will help our nation's small businesses to succeed, expand and create new jobs."
The House speaker, John Boehner, called for a "new approach" to replace "the same policies that simply haven't worked as advertised."
Others were not convinced that job growth would be sustained at this high level.
"The problem is that there is this bifurcation here in the numbers," said Bernard Baumohl, chief global economist at the Economic Outlook Group. "On the one hand we see rather impressive job growth, but on the other hand we're also seeing other economic indicators that are telling us that the economy is fundamentally weak."
Baumohl cited moderate consumer spending and an overall economic growth rate that typically does not support this level of hiring.
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