The U.S. added twice as many jobs in October as the month before and the unemployment rate stayed at a five-year low, easing concern of broader slowdown in the economy, economists said before a government report today.
Employers added 123,000 workers to payrolls during the month, up from 51,000 in September that was the smallest gain in almost a year, according to the median estimate of 76 economists surveyed by Bloomberg News. The unemployment rate probably held at 4.6 percent.
More plentiful jobs and rising incomes last month encouraged consumers to keep spending. That gave the economy a lift after it stumbled in the third quarter with the biggest decline in homebuilding in 15 years. A strong labor market bears out Federal Reserve policy makers' forecast of "moderate'' economic growth in coming months.
"Labor market fundamentals are still healthy and the job market is tight,'' said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto. "We continue to see upward pressures on wages.''
The Labor Department is scheduled to release its report at 8:30 a.m. in Washington. Forecasts for the increase in payrolls ranged from 72,000 to 180,000. Payroll gains averaged about 137,000 a month this year. Estimates for the unemployment rate ranged from 4.5 percent to 4.8 percent.
Later today, a report from the Institute for Supply Management may show service industries in the U.S. expanded at a faster pace in October. The Institute's index of non- manufacturing businesses rose to 54.5 last month from 52.9 in September, based on the median estimate in a Bloomberg survey of economists.
Campaign Message
President George W. Bush is campaigning ahead of next week's midterm elections by telling voters that Republicans will do a better job protecting America, and that Republican policies, especially $1.85 trillion in tax cuts, have made the economy strong.
Bush said in a Nov. 1 interview that pessimism over the course of the Iraq war "overshadows'' and affects voters' perceptions of other issues, including the economy.
"I think labor market conditions will remain pretty firm,'' Fed Bank of Richmond Jeffrey Lacker said in a speech this week in Baltimore. "Even if they ease a bit, they would have to ease a lot to throw a monkey wrench into consumer spending growth and that doesn't seem likely to me.''
The Fed held its benchmark overnight lending rate steady for a third straight month in October. Central bankers said that, while "some inflation risks remain,'' a slowing economy will probably cause inflation to moderate.''
Inflation Forecast
That inflation forecast is less certain after a Labor Department report yesterday showed U.S. labor costs rose and worker productivity unexpectedly stalled in the third quarter.
The low jobless rate probably helped lift wages in October.
Average hourly wages probably rose 0.3 percent in October after a 0.2 percent gain a month earlier, according to the Bloomberg survey. The expected increase would put earnings up 3.8 percent from October 2005, compared with a 12-month gain of 4 percent in September.
Consumers begin the holiday season with more cash in their pockets, anchoring forecasts for improved economic growth in the fourth quarter. The economy grew at the slowest pace in more than three years last quarter as a decline in homebuilding subtracted the most from overall growth in almost 25 years.
Holiday Spending
U.S. consumers may spend 6.5 percent more during the holidays than a year earlier, accounting firm Ernst & Young LLP said. The season accounts for a fifth of sales at retailers such as Wal-Mart Stores Inc. and Federated Department Stores Inc. and is the most profitable period for most stores.
Because fewer people are entering the labor force than in years past, smaller payroll gains are needed to keep the unemployment rate steady, economists said. That number is now about 130,000 per month, Fed Chairman Ben S. Bernanke said in testimony to Congress in July.
"Labor force growth isn't going to be as strong as it has been,'' the Fed's Lacker said.
Filings for unemployment benefits this month were little changed from September, suggesting companies are holding on to workers. The number of Americans filing first-time claims for jobless benefits in October has averaged about 311,000, down from 314,000 in September and 332,000 for all of last year.
Job cuts announced by U.S. employers fell 15 percent in October from a year earlier, a private survey from Challenger, Gray & Christmas Inc., a Chicago-based placement firm, showed yesterday.
Housing Slowdown
At the same time, the housing-led slowdown in economic growth may be starting to make people more uneasy about the outlook for hiring. A monthly survey of consumer confidence from the New York-based Conference Board this week unexpectedly fell. The share of consumers who said jobs are plentiful fell to 25.8 percent from 26.2 percent in September. The proportion who said jobs are hard to get rose to 22 from 20.9.
The decline in housing the past year suggests builders shed jobs last month, said Haseeb Ahmed, an economist at JPMorgan Chase Bank in New York. He forecasts a loss of 5,000 construction jobs.
Manufacturers probably shed 5,000 jobs during the month, based on the median estimate in the Bloomberg survey.
Cooper Tire & Rubber Co., North America's second-largest tiremaker, will shed 500 jobs and trim production 33 percent at its plant in Texarkana, Arkansas, as part of a plan to reduce costs.
Ford Motor Co., after posting its biggest quarterly loss in 14 years, yesterday said it will reduce expenses for U.S. salaried workers by abolishing merit-pay raises and trimming healthcare contributions. Ford already plans to cut 10,000 salaried jobs in North America by the end of the first quarter.
Bloomberg Survey
FIRM Nonfarm Unemploy Manu
Payroll Rate Payroll
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Number of replies 76 72 12
MEDIAN 123 4.6% -5
AVERAGE 118 4.6% -5
High Forecast 180 4.8% 5
Low Forecast 70 4.5% -10
Previous 51 4.6% -19
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