Jobs report arouses new optimism
WASHINGTON — The final major economic report before election day, showing employers added a solid 171,000 new jobs in October, may not change many minds, but it does suggest that whoever wins Tuesday could enjoy increased economic momentum heading into next year.
Businesses stepped up their hiring last month, and more people jumped back into the job market, signs that the economy is picking up steam even as unemployment remains high.
Job numbers expanded across a broad range of industries, including the long-depressed construction sector. That part of the economy should get a further lift in the next couple of months from rebuilding after the devastating storm that hit the Northeast this week.
What’s more, the statistics indicated that payroll growth in the last two months had been sharply higher than previously thought. Revisions in the numbers boosted optimism among economists that the nation’s job-creation machine could kick into higher gear.
The jobless rate rose to 7.9% from 7.8% in September, but that wasn’t because of swelling ranks of unemployed workers, but rather gains in the number of people returning to the labor market — a positive sign that workers may be feeling more confident about their job prospects.
For all that, the stronger-than-expected jobs report Friday from the Labor Department isn’t likely to have a huge effect on the presidential vote. The numbers were not eye-poppingly different from last month; the vast majority of voters already have made up their minds about the economy and more than 25 million Americans have cast their ballots, closing in on one-fifth of the likely turnout.
Nonetheless, the report, along with other recent indicators showing improvements in the housing market and consumer confidence, does suggest smoother sailing for whoever wins — though the looming possibility of a sudden increase in taxes and reduction in government spending come Jan. 1 continues to act as a drag on the economy.
“The U.S. economy is beginning to find its rhythm,” said Mark Zandi, chief economist at Moody’s Analytics.
But he noted that if lawmakers fail to avert the so-called fiscal cliff — the automatic tax hikes and spending cuts set to take place — “the improvements of the past few months will be quickly unwound.”
Lawmakers also need to tackle the thorny issue of raising the debt ceiling early next year.
Heading into the final weekend before the election, President Obama and challenger Mitt Romney stuck to their scripts in responding to the report.
The White House, as it has throughout the campaign, noted that the economy has steadily climbed back from the extraordinarily deep recession with, now, 32 months of private-sector job growth. Romney and his Republican backers turned the spotlight on the still-high unemployment rate as an indication of what they see as ineffective economic policies under Obama.
The unemployment rate was 7.8% when Obama took office in January 2009, and it rose to a high of 10% in October of that year before slowly coming down. The rate fell below 8% in September for the first time since Obama’s inauguration, but the tick up to 7.9% last month was just enough to give Romney a fresh attack line Friday.
“Unemployment is higher today than when Barack Obama took office,” Romney told thousands gathered at a state fair pavilion outside Milwaukee. “Think of that — unemployment today is higher than on the day Barack Obama took office.”
Obama, campaigning in the battleground state of Ohio, said: “You know, in 2008 we were in the middle of two wars and the worst economic crisis since the Great Depression. And today our businesses have created nearly 51/2 million new jobs.”
Those job gains don’t constitute boom times.
“It wasn’t a home-run kind of report,” said Phil Orlando, chief equity strategist at Federated Investors Inc. in New York. “I wouldn’t say the labor market is out of the woods.”
Still, the latest increases marked a continuing improvement from sluggish hiring last spring.
With 171,000 new jobs in October and upward revisions that added 84,000 jobs to the August and September totals, employers have expanded their payrolls an average of 173,000 a month since July. That’s strong enough to absorb new workers coming into the labor market and to bring down the jobless rate, albeit only slowly.
“Employment growth has kicked up a notch,” said Heidi Shierholz, a labor economist at the Economic Policy Institute. Still, she noted, at a pace of 170,000 new jobs a month, the economy wouldn’t return to the pre-recession unemployment rate until the end of the decade.
“We need it to kick up a lot more notches,” she said.
One reason for hope about further improvements is the housing market. After several years of
depressed activity, home sales and construction are growing — and that is helping consumer confidence, which rose in October to its highest level since late 2007, as measured by the University of Michigan survey of consumers.
The improvements in home sales and building also have boosted hiring. Construction payrolls were up 17,000 last month after smaller gains in the previous four months.
Raymond Gaster, owner of a lumber and hardware business in Savannah, Ga., said he recently hired two workers, a yard man and a driver, and he is looking for more sales people to add before year-end. Gaster expects his company’s sales to show a 17% increase this year. He sees the potential to do double that next year.
“Right now, I’m optimistic,” he said.
Stocks initially rose after the jobs report but ended down Friday, with the Dow Jones industrial average falling more than 1% and giving up all of the gains from a day earlier.
One reason may be that though employment growth beat analysts’ expectations for 125,000 jobs, the monthly data also showed stagnant wages — partly reflecting the fact that many of the new jobs pay low wages — and there was no gain in average employee hours worked, a leading indicator.
A broad swath of service industries saw job gains in October. So did manufacturing payrolls, which rebounded after dropping in the prior two months. If the debt crisis in Europe turns the corner, as some experts see happening, that would give a lift to trade and economic growth. And it would remove a major head wind for American businesses.
U.S. exports and business spending for equipment have been big growth engines since the recovery began in mid-2009 but have weakened in recent months. Companies have pulled back amid uncertainties about future economic and tax policies. But that picture will become clearer after Tuesday.
Dean Baker, an economist at the Center for Economic and Policy Research, sees a good chance that hiring will pick up in the coming months. That’s not to say the economy will be creating 300,000 and 400,000 jobs a month, as it did after the deep recessions in the mid-1970s and early 1980s, he said. But with the biggest impediments to faster growth looking like they may ease, there’s hope that employment growth will accelerate a bit — at least over the short term.
“We are on a path that definitely looks better,” Baker said.
Times staff writer Seema Mehta, reporting from West Allis, Wis., contributed to this report.
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