U.S. employers reduced their payrolls by 17,000 jobs in January, marking the first cut since August 2003.

The job losses noted in today’s report from the U.S. Labor Department came as a surprise. Economists had been looking for payrolls to grow by about 70,000.

“The unexpected drop in January employment adds to the mounting problems confronting the U.S. economy along with the credit tightening and declining housing activity,” wrote RBC’s assistant chief economist, Paul Ferley in a morning note. “However, if job declines deepen in subsequent months, the growth rate will likely turn negative.”

The overall unemployment rate dipped slightly to 4.9%, from 5% in December as people dropped out of the civilian work force.

Weaknesses in manufacturing and construction were cited as major reasons for the job losses. Manufacturers trimmed 28,000 jobs for their payrolls in January, while 27,000 construction sector jobs disappeared.

Job losses in those sectors overshadowed gains in education, health care and retailing.

As well, the overall workweek dropped to 33.7 hours from 33.8 hours in December.

“Given our expectation of a 1% drop in the second quarter, this would confirm that the U.S. economy slipped into recession in the first half of this year,” added Ferley.

BME economists agree this spells recession. “The decline in payroll jobs and aggregate hours suggest that GDP contracted last month, likely marking the start of recession,” wrote Michael Gregory, senior economist at BMO Capital Markets. “Now we turn our attention to the depth and duration of the downturn. Tomorrow, as the groundhog searches for its shadow (and the prospect for six more weeks of winter weather), we wonder whether this might also mean six more months of recession.”

Unemployment figures for Canada are scheduled to be released on Friday, February 8.