Observable with rx broken after error

Im trying to write login flow for my app using ngrx store + ng effects. I have managed to write it and it works in happy scenerio, but when user inputs wrong values to the form, so that server responds with 401, the next login attempt has no effects. I have read that the exception must be catch when working with observables in order not to 'break' the stream, but as far i know I'm catch the exception and still its now working.

belowe the code;

export class LoginComponent {

  logged = new Observable<any>();

  constructor(private store: Store<AppStore>) {
   this.logged = store.select('login');
  }

  login(username: string, password: string){
    let body = JSON.stringify({username, password});
    this.store.dispatch({type: LoginActions.ATTEMPT_LOGIN, payload: body});
  }

}

@Injectable()
export class LoginEffects {

  constructor(
    private actions: Actions,
    private loginService: LoginService
  ) { }

  @Effect() login = this.actions
    .ofType(LoginActions.ATTEMPT_LOGIN)
    .map(toPayload)
    .switchMap(payload => this.loginService.attemptLogin(payload))
    .map(response => new LoginActions.LoginSuccess(response))
    .catch(error => of(new LoginActions.LoginFailed(error)));

  @Effect() success = this.actions
    .ofType(LoginActions.LOGIN_SUCCESS)
    .map(toPayload)
    .map(payload => localStorage.setItem(Global.TOKEN, payload))
    .map(() => go(['/menu']));

  @Effect() error = this.actions
    .ofType(LoginActions.LOGIN_FAILED)
    .map(toPayload)
    .map(payload => console.log(payload))
    .ignoreElements();
}

export const login = (state: any = null, action: Actions) => {
  switch (action.type) {
    case LoginActions.ATTEMPT_LOGIN:
      console.log('hello from reducer attempt login');
      return action.payload;
    case LoginActions.LOGIN_SUCCESS:
      console.log('hello from reducer success login');
      return action.payload;
    case LoginActions.LOGIN_FAILED:
      console.log('hello from reducer failed login');
      return action.payload;
    default:
      return state;
  }
};

@Injectable()
export class LoginService {

  auth = new Observable<any>();
  constructor(private store: Store<AppStore>, private http: Http) {
    this.auth = store.select('auth');
  }

  attemptLogin(payload): Observable<any> {
    // let body = JSON.stringify({username, password});
    return this.http.post(Global.API_URL + '/login', payload)
      .map(response => response.headers.get('Authorization'));
      // .map(action => (
      //   { type: LoginActions.ATTEMPT_LOGIN, payload: action}))
      // .subscribe(action => {this.store.dispatch(action);
      // });
  }
}