Jump in U.S. hiring lifts spirits on economy
WASHINGTON (Reuters) - U.S. employment surged much more than expected last month as private companies hired workers at the fastest pace since April, a sign the sluggish economy is finally starting to tick up.
Nonfarm payrolls rose by 151,000 in October, the first gain since May, and more than double economists' expectations, a Labour Department report showed on Friday. Private hiring rose by 159,000, while government cut only 8,000 jobs.
Concern over the anaemic job market was a factor behind the Federal Reserve's decision this week to pump an additional $600 billion into the economy through government bond purchases to push interest rates down and stimulate demand.
Analysts said the data was not strong enough to knock the Fed off its new policy course, but it tempered speculation the central bank might have to step up its bond buying.
"The report confirms the economy is regaining momentum and provides an encouraging signal of business confidence," said Aaron Smith, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Data for August and September also was revised to show 110,000 fewer jobs were lost than previously estimated. Private payrolls have grown above 100,000 for each of the last four months and are now up 1.1 million since December.
The upbeat data drew a mixed reaction from U.S. financial markets. Stocks ended marginally higher as investors pocketed profits after shares hit a two-year high on Thursday, while the U.S. dollar soared and government debt prices fell as traders reined in bets on a further easing of monetary policy.
While the department's survey of employers found solid job growth, a more volatile survey of households showed losses and the unemployment rate remained stuck at a painfully high 9.6 percent for a third straight month. It would have risen had some workers not left the labour force.
A 1.8 percent drop in pending sales of previously owned homes in September provided another reminder the economic recovery remained fragile.
SUSTAINED JOB GROWTH NEEDED
The U.S. central bank, which cut overnight interest rates to near zero in December 2008 and then bought about $1.7 trillion (1.05 trillion pounds) in debt to spur recovery, has been worried about the lofty level of unemployment and a slowing in inflation.
Fed Chairman Ben Bernanke told college students on Friday a healthy domestic economy was critical for global growth.
"I think it's important to emphasise ... that a strong U.S. economy, a recovering economy, is critical, not just for Americans but it's also critical for the global recovery," Bernanke said.
Economists said it was not clear yet whether the economy was on a path that would do much to curb joblessness.
"The Fed is looking for sustained job creation of about 200,000 a month that drives the unemployment rate down in a meaningful way," said Neil Dutta an economist at Bank of America Merrill Lynch in New York. "That process remains sluggish, but the momentum might be improving."
Anger over joblessness helped the Republican Party wrest control of the House of Representatives from Democrats in elections on Tuesday, which were viewed as a referendum on President Barack Obama's economic policies.
Obama described the data as encouraging, but said the jobless rate was still unacceptably high. Speaking at the White House, he renewed a call for small business tax breaks, new infrastructure spending, aid for the unemployed and an extension of soon-to-expire tax cuts for the middle class.
"I am open to any idea, any proposal, any way we can get the economy growing faster so that people who need work can find it faster," Obama said.
House Republican leader John Boehner said tax cuts for wealthier Americans also needed to be extended, a prospect the White House has hinted it is open to on a temporary basis.
"Stagnant and stubbornly high unemployment makes clear why permanently stopping all the looming tax hikes should top Washington's to-do list this month," Boehner said.
SHOW ME THE JOBS
The October payrolls data was the latest in a series of recent signs that economic growth is firming somewhat. Other reports have shown growth in both the manufacturing and service sectors in October.
Recovery prospects also brightened as a Fed report showed consumer credit rose in September for the first time since January, a positive sign for consumer spending.
Jobs growth in October was supported by the private service-providing sector, where employment jumped by 154,000.
Temporary help services, a harbinger of permanent hiring, increased 34,900 from 23,800 in September. Hiring at retailers, in the health care sector and at restaurants was also strong.
But manufacturing payrolls fell 7,000 after declining 2,000 in September. Construction firms unexpectedly added 5,000 workers, helping payrolls in the goods-producing sector to rise 5,000 after falling 4,000 in September.
The average workweek increased to 34.3 hours from 34.2 hours in September, another sign economic activity was expanding. Average hourly earnings increased five cents, which should help to support consumer spending.
Local government payrolls, which contributed to sinking government employment in September, fell 14,200 in October. There was a small drag on government employment from the departure of 5,000 workers hired temporarily to conduct the decennial census.
Although the jobless rate held steady, a broader measure of underemployment edged down for the first time in five months.
(Editing by Neil Stempleman)
- Tweet this
- Share this
- Digg this