GO
Loading...

October Payrolls Double Forecasts; Factory Orders Up

U.S. employers added about twice as many new employees last month than expected, while factory orders edged up, according to government reports that implied the economy was strong enough to avoid recession.

The Labor Department said 166,000 non-farm jobs were added in October, enough to support consumer incomes and spending in the approaching holiday shopping season.

Separately, the Commerce Department said new orders at U.S. factories gained 0.2 percent in September despite forecasts for a decline, mainly because machinery and computer orders rose.

U.S. stocks were briefly buoyed by the positive job news but by mid-morning had turned negative again on renewed worries that a credit crunch is worsening and imperils banks and financial services companies.

Treasury debt prices climbed as investors bet the Federal Reserve may have to cut interest rates again. The U.S. central bank lowered rates a quarter percentage point on Wednesday.

Why So Gloomy?

Some analysts said the healthy jobs report should have allayed concerns about the economy's direction.

"I don't know why the Fed is cutting rates in this environment, with full employment and when consumers are spending," said economist Richard Yamarone of Argus Research in New York. "The economy is in no apparent need of stimulus, barring any unforeseen seize-up."

The Labor Department said the national unemployment rate in October was unchanged at 4.7 percent. It revised September hiring to show that 96,000 jobs were added instead of 110,000 it reported a month ago and said 93,000 new jobs in August instead of 89,000 that it previously reported.

But soaring oil prices, above $90 a barrel, and concerns about a credit crunch and a deepening slump in housing cast a pall over markets. A senior U.S. Treasury Department official, Undersecretary Robert Steel, told Congress that foreclosures will remain above average for the next 1-1/2 years.

The monthly jobs report is one of the first insights into fourth-quarter economic activity. The strong October hiring number may allay some concern that consumers will be so fearful about their jobs that they will be reluctant to spend in the crucial Thanksgiving-to-Christmas holiday season.

Upbeat On Prospects

In a telephone interview, Commerce Secretary Carlos Gutierrez said he saw no sign of downturn on the horizon.

"All of the indicators we look at -- job creation, wage growth, wages after taxes, export growth, factory business -- everything points to a very healthy economy and to one that should stay that way," Gutierrez said.

Private-sector analysts said policy-makers should feel reassured by the jobs data.

"It was a very sturdy number in every respect, certainly giving the Fed confidence that they did the right thing," said Pierre Ellis, senior economist with Decision Economics in New York. "The main hope for the housing market has always been solidity of employment and income growth and so far that's holding."

The monthly report showed 190,000 jobs were created in service industries while 24,000 were lost in the goods-producing sector for a much stronger overall result than anticipated.

Yamarone of Argus Research said the robust jobs report should reduce some of the concern among consumers about their financial prospects.

"The main thing consumers care about is their current employment status and expectations of employment," Yamarone said. "So I can't imagine that the current uncertainty in the financial markets would derail the consumer."

Among service industries, business services added 65,000 jobs in October and leisure and hospitality industries hired 56,000 more. Manufacturers cut 21,000 jobs while construction industries reduced payrolls by 5,000 in October, only about one-third of the 14,000 they shed in September.

Both the weekly hours of work and factory overtime hours were unchanged from September at 33.8 and 4.1 hours respectively.

Contact Economy

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More