Job Report Falls Short of Forecasts
The nation’s job market rebounded last month from hurricane-related losses, although the payroll gain was far below expectations as high energy prices may have damped hiring in regions not directly hit by the storms, the government reported Friday.
U.S. employers added a net 56,000 jobs in October, the Labor Department said. That fell well short of the 100,000-job gain predicted by economists and the 196,000 average monthly increase from January to August.
Adding to the disappointment, a Labor Department official said the subpar data could not all be blamed on the damage caused by hurricanes Katrina and Rita in the Gulf Coast.
“Job growth in the remainder of the country appeared to be below trend in October,” said Kathleen Utgoff, commissioner of the department’s Bureau of Labor Statistics. She pointed to the nationwide effect of the hurricanes on energy prices.
The latest report renewed concerns about whether high energy prices -- coming on top of steep benefit costs and intense global competition -- were eroding employers’ willingness to hire aggressively even in an economy growing at an above-average pace. A subpar job market could in turn curb consumer spending during the crucial upcoming holiday shopping season.
Many analysts said the job market and economy were in much better shape than the latest report suggested.
And workers could take heart in a surprisingly strong 0.5% increase in average hourly earnings, up 8 cents to $16.27. That was the biggest monthly gain since February 2003, prompting some analysts to suggest that wages may finally start growing more robustly after years of failing to keep pace with inflation.
“Labor will start demanding bigger pay increases and will get them,” said Mark Zandi, chief economist at research firm Economy.com in West Chester, Pa.
Also on the positive side, the unemployment rate fell to 5% from 5.1% in September. And employment in September was revised upward by 27,000 jobs, putting that month’s net loss at 8,000 positions -- suggesting that the effect of the hurricanes on employment wasn’t as bad as initially feared.
However, pre-storm job gains weren’t as robust. Employers added a net 148,000 positions in August, 63,000 less than previously estimated.
Advances in worker output, reflected in an unexpectedly large 4.1% rise in productivity in the third quarter, suggest that many businesses are squeezing more work out of existing employees.
Hiring in many private-sector industries was anemic in October, with leisure and hospitality losing a net 18,000 jobs and retail trade dropping 5,000 positions.
“These losses may reflect the fact that consumers facing higher energy prices and falling real [inflation-adjusted] wages are cutting back on discretionary spending,” said Jared Bernstein, an economist at the liberal Economic Policy Institute in Washington.
The hurricanes, however, may have created a wait-and-see attitude among employers across the country, causing them to delay hiring decisions, economist Zandi said.
“But the underlying job market is sturdy and that will shine through early next year,” he said.
With the exception of airlines and automakers, “American businesses are in great financial shape.... In January and February they will be out hiring aggressively again,” Zandi said, suggesting that there will be a return to the average gain of nearly 200,000 jobs a month earlier this year.
Another bright spot: The manufacturing sector added a net 12,000 jobs, reversing recent declines. However, that largely reflected the return of striking workers at aerospace giant Boeing Co. in the Seattle area, said Michael Swanson, senior economist for Wells Fargo Bank in Minneapolis. And because those workers are relatively well paid, their return to work was a factor in the strong increase in average hourly earnings, he said.
Also adding workers in October were construction, up a net 33,000 in part because of post-storm rebuilding activity; professional and business services, up 12,000; education and health services, 11,000; and government, 10,000.
The Bush administration put a positive spin on the latest job numbers.
Friday’s report “is the latest evidence that the fundamental strength of the American economy is helping the nation overcome the challenges presented by the Gulf Coast hurricanes and high energy prices,” Treasury Secretary John W. Snow said.
