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U.S. payrolls jumped by 166,000 in October

Employers added twice as many new jobs to their ranks than expected in October, an encouraging sign that the nation’s employment climate is not cracking under the stress of a deepening housing slump.
/ Source: The Associated Press

Employers added twice as many new jobs to their ranks than expected in October, an encouraging sign that the nation’s employment climate is not cracking under the stress of a deepening housing slump.

The Labor Department reported Friday that the nation’s payrolls grew by a net 166,000, the most in five months. The unemployment rate didn’t budge at 4.7 percent, a figure considered low by historical standards.

Job gains were logged at schools, hospitals, bars and restaurants, hotels and motels, temporary-help firms, legal services, accounting and bookkeeping companies, the government and other places.

Those hiring increases more than offset jobs losses at factories, construction companies and mortgage businesses — casualties of the meltdowns in the housing and credit markets. Retailers and trucking companies also shed jobs.

“There is no question that employers are more cautious as they look forward. But I think many of them are not seeing it in their actual operations. They need workers and they are hiring,” said John Challenger, president of Challenger, Gray & Christmas, a placement firm.

The latest report on employment conditions nationwide was better than economists anticipated. Economists were expecting payrolls in October to grow by a much smaller 80,000.

“Businesses have not clammed up on the hiring scene as some feared,” said Ken Mayland, president of ClearView Economics. “The wheels aren’t coming off the economy.”

On Wall Street, the Dow Jones industrials, down most of the session reflecting investors' skittishness, managed an eleventh-hour turnaround. The index gained 27.23 points to close at 13,595.10. One day earlier, the Dow plunged more than 360 points, underscoring the fragile state of financial markets.

President Bush pointed to fresh employment figures as evidence that his economic policies work. “This is now our 50th consecutive month of uninterrupted job growth, the longest in the nation’s history,” he said.

Even so, the trend this year has been toward softer job growth. Wage growth, meanwhile, moderated a bit last month.

Average hourly earnings rose to $17.58 in October, a 0.2 percent increase. That was down slightly from a 0.3 percent rise in September. Over the past 12 months, wages were up 3.8 percent.

Still, economists said the wage gains should be sufficient to support consumer spending and keep the economic expansion — which began in late 2001 — intact.

The state of the nation’s employment climate is a crucial factor determining whether the economy will, in fact, weather the financial storm. So far, decent job creation and wage growth have helped to offset some of the negative forces hitting some individuals from the housing slump, weaker home values and harder-to-get credit.

To be sure, problems challenging the economy are hitting some industries and workers hard. Construction employment has fallen by 124,000 since its peak in September 2006. Factories have cut more than 200,000 jobs over the year. Employment at mortgage firms has fallen by 56,000 since its peak in February.

The economy, which grew at a brisk 3.9 percent annual rate in the third quarter, is expected to slow to about half that pace or less in the current October-to-December quarter. The toll of the housing collapse and credit crunch are expected to catch up to consumers and chill their spending.

“The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction,” Federal Reserve policymakers said Wednesday as they decided to lower their key interest rate again.

The Fed sliced its key rate by one-quarter percentage point to 4.50 percent to protect the economy from undue economic weakness in the months ahead. It was the second rate reduction in six weeks.

At the same time, the Fed hinted that it may not need to cut rates again for a while. Economists said Friday’s employment figures increase the odds that the Fed will leave its key rate unchanged at its next meeting in December.

Complicating the outlook: Surging oil prices, which have hit record highs in recent days and are hovering past $95 a barrel.

If high oil prices boost the costs of many other goods and services, inflation could spread through the economy. High energy prices also could cause people and businesses to cut back on other types of spending, putting another damper on economic growth.

As economic growth slows, the unemployment rate probably will creep up to 5 percent by early next year, economists say.

Many analysts believe the country will be able to avoid a recession, although the odds of one occurring have grown since the beginning of the year.

“This was a very solid report that tells us the economy is hardly falling apart,” Joel Naroff, president of Naroff Economic Advisors, said of the latest employment figures. But he added, “I am not yet willing to say we are out of the woods.”