Oct. job growth slows

jobless rate falls to 5%

Payrolls rise by 56,000, not 102,000 experts expected

November 05, 2005|By MARKETWATCH

WASHINGTON -- U.S. job growth slowed in October even excluding the direct impact of two monstrous hurricanes, the Labor Department said yesterday.

U.S. nonfarm payrolls rose by 56,000 after a revised 8,000 loss in September, the agency said. Economists surveyed by MarketWatch were expecting payroll gains of about 102,000 for October.

The unemployment rate fell to 5 percent in October, from 5.1 percent in September. Average hourly wages rose 0.5 percent, the fastest pace in more than two years.

The weakness in October job growth was compounded by downward revisions to the August data. The economy created 36,000 fewer jobs in August and September than first estimated.

"The overall report was modestly weaker than expected," said David W. Berson, chief economist for Fannie Mae. But, he said, "it wasn't a terrible report by any means."

The predictions of higher job growth were based on assumptions that storm-related losses would be more than offset by strong job growth in the rest of the country.

However, "job growth in the remainder of the country appeared to be below trend in October," said Kathleen P. Utgoff, commissioner of the Labor Department's Bureau of Labor Statistics.

Job growth had averaged about 200,000 per month before the storms.

The below-trend growth could be the result of indirect impacts from the storms, she said, such as higher energy costs and choked supply lines.

"Businesses are very cautious about hiring in here," said John W. Bitner, chief economist of Eastern Bank. "Of course, we had near-term affects of hurricanes, but they are not quite sure how higher energy prices are going to impact consumer spending and also rising interest rates. In order to keep costs down, they are going to be especially vigilant about hiring."

Most economists believe the impact of the storm will be temporary, with rebuilding efforts actually adding to growth and hiring late this year and into 2006.

"I'm still relatively optimistic," said William T. Olson III, chief executive of MRINetwork, a recruiting company for mid-management professionals. "We are looking for continuous job growth in 2006, maybe not quite as strong as in 2005."

Goods-producing industries created 49,000 jobs in October and private-sector service-producing industries lost 3,000. It was the first time since March 2003 that the goods side of the economy created more jobs than the services side.

Manufacturing industries created 12,000 jobs, the first increase since May. Construction added 33,000, boosted by rebuilding efforts.

Within services, retail shed 5,000 jobs after 58,000 were lost in September. Financial services added 22,000 jobs. Professional services added 12,000, including 11,000 temporary-help jobs. Health and education added 11,000 jobs.

Leisure industries cut 18,000 jobs after losing 63,000 in September.

Average hourly wages shot up 8 cents, or 0.5 percent, to $16.27. It was the largest monthly gain since February 2003. Average hourly earnings were up 2.9 percent in the past year, the biggest year-over-year gain in two years.

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