The Labor Department reported Friday that the gain in payroll jobs followed a revised gain of 41,000 jobs in September, better than the government previously estimated. This low job growth was blamed in part on the adverse effects of Hurricane Floyd.
The report sent share prices skyward Friday. In bullish fashion, the move was exceptionally broad, came on heavy volume, and featured leadership from the technology, financial, and retail sectors.
Critically, average hourly earnings increased by a mere 0.1 percent, an incredibly positive figure that will diminish expectations for a rate hike when the Fed meets in less than two weeks. The expectation on Wall Street had been for a 0.3 percent rise. That allowed investors to brush off a fall to 4.1 percent in the unemployment rate, less than the 4.2 percent that had been predicted.
October's unemployment rate, which followed September's 4.2 percent rate, a 29-year low, is the best performance during the nation's economic expansion which began in March 1991. The 4.1 percent rate is the lowest since a 3.9 percent rate set in January 1970. That keeps the unemployment rate at a 29-year low.
Employers, recovering from the effects of the hurricane, which raked the East Coast in September, added about the same number of jobs in October as the 305,000 range many analysts were forecasting. The 310,000-job gain in October was the largest monthly gain since July when 373,000 jobs were added to business payrolls.
While strong jobs growth is a good development for workers, economists and members of the Federal Reserve worry that it could be a recipe for sparking inflation. Their fear: employers foraging for scarce workers woo them with higher wages and benefits, costs likely to drive up consumer prices if not constrained by other forces.
Fed policy-makers meet next on Nov. 16 to decide whether to boost interest rates for a third time this year. Although many economists said the probability of the Fed raising rates has declined from a few weeks ago when it seemed a sure thing, there is still a 50 percent chance the Fed will bump up rates again in November, they said.
Financial markets have been lifted in recent sessions on the growing sense that inflation remains under control.
The bond market appeared to like the news. With no new signs of sharp rises in wages, interest rates fell on the inflation-sensitive market for government bonds, where yields on 30-year Treasuries dropped to 6.04 percent from 6.10 percent late Thursday. As recently as last week, when inflation jitters were rampant, yields on long-term bonds were at a two-year high of 6.37 percent.
Despite the big gain in payroll jobs, manufacturing continued its decline and lost 15,000 jobs in October. Still, government analysts said the jo loss in manufacturing is slowing. Since June, the number of factory jobs has fallen by an average of 12,000 per month, compared with an average declined of 36,000 per month during the first half of the year.
U.S. manufacturers have seen foreign demand for their products rebound somewhat from a global financial crisis that began in 1997.
Construction, however, added 28,000 jobs in October. Some of that growth reflects the cleanup and rebuilding after the storm.
The service sector, the driving force of job creation in the United States, rebounded in October, adding 293,000 jobs. Business services led that growth with a gain of 215,000 jobs.
But retail businesses cut 30,000 jobs, its third consecutive monthly decline after a large increase in July. There were large job declines in bars and restaurants, down by 28,000. Food stores lost 13,000 jobs and employment at general merchandise stores fell by 8,000.
Those losses were partially offset by jobs gains at building supply and garden supply stores and car dealerships.