The outlook for the economy dipped on Friday as employers cut 17,000 jobs non-farm jobs in January, the first drop in 4 and a half years, which overturned analyst estimates that 69,000 new jobs would be added to the economy.

The Labor Department reported today that job losses were spread out amongst various industries including manufacturing, construction, professional and business services. Those losses could not overcome gains in education, healthcare, retail and others.

Meanwhile, the unemployment rate, which is calculated separately, fell to 4.9 percent from 5 percent. The rate does not taken into account those workers who, for various reasons, leave the labor force. Analysts had expected the unemployment rate to remain at 5 percent.

The U.S. is facing economic challenges on various fronts, including a declining housing market and volatile financial markets. The central bank in the U.S., known as the Federal Reserve, has moved aggressively to lower borrowing costs by slashing interest rates. In the past two weeks it has cut its benchmark rate by 1.5 percent.

This week, the Commerce Department reported that economic growth, as measured by the gross domestic product grew at only 0.6 percent in the last three months of 2007, a dramatic slip from the 4.9 percent growth three months earlier.