As the robust Canadian jobs market finally shows signs of cooling, it looks like the U.S. market is starting to revive.

U.S. payrolls jumped a larger-than-expected 143,000 in January, largely offsetting a downwardly-revised decline of 156,000 in December. The unemployment rate also fell to 5.7% from 6%.

Bank of Montreal says that the large swing was caused by activity in the retail sector where a 99,000 decline in December was offset by a 101,000 gain in January. “This volatility likely reflects the impact of unusual hiring and layoff patterns over the holiday period this year. After seasonal adjustment, less hiring in December and thus fewer lay-offs in January are recorded as declines in December and gains in January. Employment changes in other sectors were minimal over the two months,” it says.

BMO also notes that manufacturing employment, though still declining, is doing so at a slower pace, consistent with improvements in the ISM employment index. The average workweek rose modestly in January to 34.2 hours from 34.1 hours in December. “The increase in January bodes well for GDP growth rising to 3.0% after a 0.7% gain in Q4, even assuming only a modest rise in productivity,” BMO concludes.

Over at BMO Nesbitt Burns, economists say that the stronger report was certainly a welcome result, but it was not quite as strong as it looked. “First, there were downward revisions to earlier months. Second, much of the gain (about 100,000) was in the retail component and did not represent a stronger trend. And third, manufacturing jobs continued to fall, but at a slower pace.” Also, the fall in the jobless rate is accompanied by a change in survey methodology.

“The economy is not falling apart, that’s for sure. However, one month’s gain in employment does not establish a trend. But it does fit well into the pattern of other data pointing to modestly better employment conditions. We will stick to our theme that after the war is over and people look back at the data from the perspective of this spring, the figures will show the economy was not bad,” notes Nesbitt.

“This reading is a positive step in the right direction but several more will need to be taken before any sort of momentum spills over into the business sector and the U.S. economy can be taken off 24-hour watch,” comments RBC Financial. “Our view that the Fed is on hold until late fall is unchanged.”

“The January employment data do not change the assessment that U.S. labour markets remain extremely weak, nor do they not alter our expectation that the U.S. economy will grow at close to an annualized 2% in the first quarter of this year,” concludes TD Bank. “That is an improvement over the 0.7% increase in real GDP in the fourth quarter, but it is still a far cry from the economy’s long-term potential rate of roughly 3%. We continue to expect that U.S. labour market conditions will improve in the coming months, but at a very gradual pace. If job creation does not begin to pick up, then the downside risks to the economic outlook will increase significantly, as a recovery in employment is becoming increasingly critical to the prospects for consumer confidence and consumer spending.”

“Today’s number, though quite not as strong as the headline might suggest, is a plus for equities and unfriendly for the bond market,” says CIBC World Markets. “Ongoing geopolitical risks are likely to provide at least some support for bonds, however, ahead of the next UN inspectors’ report on Iraq, slated for release late next week.”