Tepid Payroll Growth In October

Economy Sizzles, UP, AP / CBS

America's payrolls grew by a rather tepid 56,000 in October, a sign that the nation's job market is slowly regaining its footing after the beating administered to the Gulf Coast area by Hurricane Katrina. The unemployment rate dipped to 5 percent of the labor force.

The latest snapshot released by the Labor Department on Friday offered fresh insights into the impact of Katrina, the most costly natural disaster in U.S. history.

Importantly, job losses in September turned out to be just 8,000, according to revised figures. That was smaller than the 35,000 decline in jobs that was reported a month ago, suggesting the damage to the job market from Katrina wasn't as terrible as many had feared. Still, the storm was certainly felt: The drop in payrolls in September was the first nationwide employment decline in two years.

The unemployment rate, meanwhile, edged down to 5 percent in October as some people opted to leave the civilian labor force for any number of reasons. The jobless rate in September had crept up to 5.1 percent.

"The United States' economy is strong. It's healthy," President Bush proclaimed Friday while attending the Summit of the Americas in Argentina.

Mark Zandi, chief economist at Economy.com, said "the economy has weathered these storms about as gracefully as could be expected."

The payroll gain of 56,000 in October disappointed economists. Before the release of the report, they were predicting that around 100,000 were created during the month.

"Hiring was cautious in October," observed Carl Tannenbaum, chief economist at LaSalle Bank. "Aside from companies not being able to operate because of the hurricanes, many businesses might have been in a state of suspense as they assessed damage to their operations and to the economy that might have resulted from these storms."

Another disappointment: job gains in August turned out to be 148,000, according to revised figures. That was down from the more robust increase of 211,000 previously reported.

An inflation barometer tied to the report picked up strongly.

Workers' average hourly earnings rose to $16.27 in October, representing a 0.5 percent increase from September. Economists were calling for a 0.2 percent rise. Wage gains are good for workers but a rapid pickup can lead economists to fret about inflation.

More worried about the prospects of inflation heating up, rather than a serious slowdown in the economy, Fed policy-makers on Tuesday bumped up a key interest rate to its highest level in more than four years to keep a lid on prices. More rate increases are expected.

Federal Reserve Chairman Alan Greenspan, appearing before Congress on Thursday, said fallout from a trio of late-summer and fall hurricanes should be temporary and that the expansion remains firmly planted.

Katrina, Rita and Wilma are likely to "exert a drag" on employment and production in the short term and may aggravate inflation pressures, he said. "But the economic fundamentals remain firm, and the U.S. economy appears to retain important forward momentum," Greenspan said in his most extensive remarks thus far on the impact of the storms.

The Fed chairman is retiring in late January after 18 years at the helm of the monetary policy-making body.

For October, "job growth in the remainder of the country (outside the hurricane zone) appeared to be below trend," said Kathleen Utgoff, commissioner of the Bureau of Labor Statistics. "It is possible, of course, that employment growth for the nation could have been held down by indirect effects of hurricanes Katrina and Rita, for example, because of their impact on gas prices," she said.

Retailing and leisure and hospitality were among the areas of business that cut jobs in October. Those losses, however, were blunted by gain in construction, manufacturing, professional and business services, and in education and health services.

The latest jobs picture comes as Bush is confronted with sagging job ratings.

President Bush's job approval is at the lowest level of his presidency.

A new AP-Ipsos poll showed Bush's approval rating dipped to 37 percent, compared with 39 percent just a month ago.

Katrina slammed into the Gulf Coat on Aug. 29. Rita barreled into the region on Sept. 24. Those storms battered crucial oil and gas facilities, choked off commerce and destroyed businesses. Wilma, which hit on Oct. 24, caused widespread power outages and property damage across Florida.

While Katrina had a visible impact on employment, Rita's bite was minimal, the Labor Department said. The figures released on Friday don't capture the impact of Wilma because the employment information was collected before the hurricane hit.
  • Melissa McNamara

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