Economy Kicks Into High Gear

The economy provided icing on the cake for President Bush on Friday.

Hard on the heels of Mr. Bush's election victory comes a Labor Department report that shows employers added 337,000 new jobs to the economy in October, nearly double the number expected by economists.

The unemployment rate rose slightly, to 5.5 percent.

The economy has been adding jobs, but at a disappointing rate, over the past several months. The October report gives evidence of a robust job market.

The October job gains were the largest since March. In addition, payroll gains in August and September were revised higher by a cumulative 115,000 jobs, according to the government survey of 400,000 workplaces.

Economists had been expecting payrolls to grow by about 175,000 in October and for the unemployment rate to remain at 5.4 percent, according to a survey conducted by CBS MarketWatch.

The 0.1 percent rise in the seasonally adjusted unemployment rate occurred largely because the new hiring was offset by increasing numbers of people who came into the labor market in search of work.

Economists were elated by the surge in payrolls. "It's now looking like that soft spot is clearly over," David Wyss, chief economist at Standard & Poor's, said of the recent slowdown.

Nevertheless, some economists sounded a note of caution.

"These numbers make it very tempting to call the end of the soft patch but we are reluctant to do so," Ian Shepherdson, chief U.S. economist for High Frequency Economics, told CBS MarketWatch.

The Labor Department said the cleanup efforts from hurricanes that struck Florida and much of the Southeast helped jump-start the labor market.

Employers have added about 2.2 million jobs since August 2003.

Hiring in construction helped spur last month's job growth, with employment in that sector rising by a net 71,000 jobs.

"Some of this unusually large gain reflected rebuilding and cleanup activity in the Southeast following the four hurricanes that struck the U.S. in August and September," said Kathleen Utgoff, commissioner of the Bureau of Labor Statistics.

In the past year, construction employment has grown by about 16,000 per month.

New jobs in professional and business services also helped strengthen overall job growth last month, with hiring expanding by 97,000. Temporary employment services were responsible for about half of that, giving ammunition to Bush critics who argue that much of the recent job growth is occurring in lower-paying work that typically doesn't offer heath insurance and other benefits.

Manufacturing was the only major sector to lose jobs last month, with employment falling by a net 5,000. That followed a decline of 14,000 in September.

Some of the report showed a jobs market still struggling. The number of people who held more than one job rose by 519,000 to 8 million. The average time for the unemployed to find a job was 19.6 weeks, the same as in September.

The jobless rate for blacks jumped to 10.7 percent last month, up from 10.3 percent in September. The rate for Hispanics fell to 6.7 percent from 7.1 percent from the previous month, while the rate for teenagers grew to 17.2 percent from 16.6 percent. The rate for whites held at 4.7 percent.

But the economy is back on track, growing at a 3.7 percent annual rate in the third quarter, up from a 3.3 percent pace in the prior period.

Analysts think Federal Reserve policy-makers will continue to move rates from extraordinarily low levels to more normal levels to make sure inflation doesn't become a threat to the economy down the road.

The Fed is expected to boost short-term interest rates for a fourth time this year when it meets next week, pushing up a key rate from 1.75 percent to 2 percent.