Job Growth in October Best in 7 Months

Times Staff Writer

U.S. employers added a surprisingly strong 337,000 net jobs in October, the government reported Friday, the biggest jump in seven months and a hopeful sign that hiring may finally be gaining momentum after a sluggish summer.

In the first major statistical glimpse of the economy in the October-December quarter, the Labor Department portrayed a job market gaining vibrancy although employment still has not caught up to its level before the 2001 recession.

Meanwhile, so many workers began looking for positions last month that the unemployment rate rose slightly to 5.5%.

Economists suggested that employers who had been relying on labor-saving productivity enhancements might at last be adding more workers in an economy whose growth rate had picked up of late. Only time will tell, though, whether the labor market is really gaining steam -- or whether bigger job gains will prove ephemeral, as they have before.


“We saw similarly strong job growth in the early spring, but it faltered over the summer,” said Lawrence Mishel, president of the liberal Economic Policy Institute. “We will see over the next several months whether the labor market has finally established a firm recovery.”

The October job increase was nearly double the 175,000 expected by economists. In addition, the Labor Department revised upward by 113,000 the net jobs added during the previous two months.

But improving work prospects drew an additional 367,000 people into the labor market, driving the unemployment rate up one-tenth of a point from the 5.4% it stood at in August and September.

The report put the nation just 371,000 positions shy of regaining all the net jobs lost during President Bush’s first term -- a period marked by the 2001 recession and terrorist attacks and continued fallout from the popping of the stock market’s bubble. If the government eventually confirms a provisional upward revision of 236,000 jobs for the 12 months ended in March, Bush’s deficit so far would drop to just 135,000.


During the election campaign, Democrats frequently asserted that Bush was on his way to becoming the first president since Herbert Hoover to have a net job loss during his term. It now looks more likely that he can avoid that ignominious comparison.

The Bush administration hailed October’s job growth as the product of its tax cuts. “The growing strength of the U.S. economy is further evident in today’s employment report,” Treasury Secretary John W. Snow said.

Investors also hailed the news. The Dow Jones industrial average rose 72.78 points to close at 10,387.54 on Friday, ending a week of solid gains sparked in part by Bush’s electoral victory.

Bill Dudley, chief domestic economist at Goldman Sachs & Co., said the report showed the economy was withstanding the recent run-up in world oil prices.


Dudley and other analysts said the robust job growth meant that the Federal Reserve would continue bumping up its benchmark short-term interest rate with increases of one-quarter of a percentage point in November and December. But Drew Matus, an economist with Lehman Bros., stuck with his prediction that the Fed would pause in December.

The Fed has boosted the federal funds rate, which banks charge each other for overnight loans, from 1% in June to its current 1.75%. Its policymaking Federal Open Market Committee meets again Wednesday.

In general, the economic recovery that came after the 2001 recession has been notable for its grudging employment increases. Even with October’s data, “job growth has been slower than during the recovery from the recession of the early 1990s,” noted Heather Boushey, an economist with the Center for Economic and Policy Research.

And the picture painted by the new report was not all rosy. Manufacturers cut an additional 5,000 net jobs and deployed non-management workers for 7.6% fewer hours a week on average than in November 2001, when the last recession ended.


“Never before has a recovery failed to increase the number of hours worked in manufacturing,” said Charles W. McMillion, president of MBG Information Services, a Washington consulting firm.

The construction industry, by contrast, took on 71,000 net new workers in October, many to rebuild after the devastation of the Florida hurricanes. Those jobs may prove short-lived.

Temporary workers accounted for 48,000 net new jobs, possibly a reflection of employers’ continuing reluctance to hire permanent employees who would be entitled to full benefits. But some analysts said the jump in temporary help showed that employers needed more workers and would consider hiring permanent ones in coming months.

The Labor Department classified 5.1 million Americans as wanting a job but not looking for one, an increase from 4.6 million a year earlier. Such people, many of them discouraged about their job prospects, are considered to be outside the labor force.


Still in the labor force are the long-term unemployed -- those who have been out of work for more than half a year despite having looked for a job. Their share of the unemployed has been more than 20% for two years, and rose to 22.2% in October from 21.8% in September.

“This reflects the tepid job growth in this recovery,” Boushey said. “It is out of sync with what we typically see in a recovery.”




Sector growth

Number of jobs gained by a sampling of industries in October

(In thousands)

Construction: 71


Temporary help: 48

Health services: 41

Educational services: 22

Retail trade: 21


Source: Bureau of Labor Statistics