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Industry Payrolls Trimmed in Jan.

The fashion industry, jittery about the faltering economy, cut payrolls across the manufacturing and retail sectors last month as the overall employment...

WASHINGTON — The fashion industry, jittery about the faltering economy, cut payrolls across the manufacturing and retail sectors last month as the overall employment picture worsened and fears of a recession deepened.

Posting the biggest employment drop in more than four years, employers slashed a seasonally adjusted 17,000 jobs in January, a worse-than-expected showing, according to the Labor Department. The jobless rate slid to 4.9 percent last month from 5 percent, which some economists said was statistically negligible or simply a correction after the sharp jump in December to 5 percent from 4.7 percent.

“The incoming data continues to show the economy slowing sharply,” said Nigel Gault, a U.S. economist at Global Insight. “Whether it is just stalled or heading into recession isn’t yet clear.”

Gault said he expects “more bad news” in the labor market through the middle of the year until consumers begin to feel the anticipated impact of the Federal Reserve’s aggressive interest rate cuts and tax rebates being negotiated in Congress.

Economists generally agree that the U.S. has not yet felt the full effects of the housing slump, subprime mortgage crisis, tight credit and higher energy costs that have all combined to dampen consumer spending and depress retail sales.

On the retail front, apparel and accessories stores reduced their payrolls by 9,200 last month to 1.54 million, after cutting back by 7,900 in December following a disappointing holiday season. Department stores eliminated 3,500 jobs from payrolls in January for a total of 1.56 million, after gaining some ground in December by adding 4,800 jobs.

Domestic producers deepened their slump as foreign competition continued to erode the U.S. manufacturing base. Apparel producers trimmed employment by 2,500 to 202,200, textile mills cut payrolls by 900 to 162,000 and textile product mills eliminated 1,200 jobs for a total of 154,500.

“The clothing stores really took a beating,” said Sophia Korpeckyj, an economist at Moody’s Economy.com. “The housing market really affected consumer confidence and people don’t want to spend. They don’t know whether they are going to keep their jobs. Even if they keep their jobs, they may be working fewer hours and because of this uncertainty, people are more hesitant to open their wallets.”

Richard Yamarone, chief economist at Argus Research Corp., warned against reading too much into the retail employment numbers because the January report is based on a revision by the government.

“We get incredible revisions in everything from spending to employment [reports] and we have to really take all of these data with a grain of salt right now,” he said.

The revisions notwithstanding, Yamarone said there were some “pretty hefty” job cuts in the apparel retailing sector. But he said merchants typically shrink payrolls back after the holiday season.

“Record gift card issuances lead to record redemptions and you need people to facilitate those transactions,” Yamarone said. “Unfortunately, I think some retailers, particularly apparel specialty stores and department stores, just couldn’t warrant holding on to their staffs after the redemptions.”