Jobs Report Makes Modest Rate Cut More Likely
U.S. employers added 94,000 jobs in November, but a slowdown in job creation in recent months raises chances for a modest cut in interest rates next week.
Analysts said continued gains in hiring showed the economy was not at immediate risk of crumbling onto recession despite strains from a weak housing sector and credit tightness. But a later report showed consumers' moods grew darker in December.
"Current employment gains are not robust, but sufficient to keep the consumer out of serious trouble," said Stephen Gallagher, chief U.S. economist for Societe Generale in New York, though they are battling with slumping home prices and soaring energy costs.
Stocks were mostly flatin reaction. But U.S. Treasury debt prices fell as investors bet the jobs numbers meant Federal Reserve policy-makers were more likely to cut interest rates by a quarter than by a half percentage point when they meet next Tuesday.
The jobs data "wasn't so weak it would shore up the notion we'd get at least a 50 basis-point cut, nor was it so robust that it told us we have no risk in the economy," said Joseph Battipaglia, market strategist at Stifel Nicolaus in Philadelphia.
The Labor Department said the national unemployment rate was unchanged at 4.7 percent in November, but it substantially revised its estimates for job growth in the two prior months to
show a less vigorous pace of hiring.
The department said 170,000 jobs were added in October instead of 166,000 it reported a month ago and slashed its estimate for September new jobs to 44,000 from 96,000 - a net
decrease of 48,000 over the two months.
A report issued at mid-morning by Reuters/University of Michigan showed its index of confidence fell to 74.5 so far this month, slightly below analyst forecasts and down from 76.1
in November. Excluding a reading in October 2005, shortly after Hurricane Katrina devastated the gulf coast region, it was the worst level in 15 years.
It was a third straight monthly fall in confidence and analysts said it contained worrying signs that consumers fear gasoline and other costs are going to keep rising.
"The Fed is going to keep cutting rates to save the economy, but inflation still remains an issue, at least for the consumer," said Peter Boockvar, an equity strategist with
Miller Tabak, who said conditions were becoming "stagflationary" - with growth slowing and prices rising.
The revised September job-creation figure was the weakest monthly gain in more than 3-1/2 years, since 31,000 jobs were added in February 2004, department officials said.
Nonetheless, the November new jobs total came in slightly ahead of forecasts by Wall Street economists for 90,000 jobs.
"Not too hot, not too cold," said Hank Smith, chief investment officer for equity management with Haverford Investment in Radnor, Pennsylvania.
"This assures a rate cut for next week," Smith added, but it may be aimed less at stimulating economic activity and more at breathing confidence into battered credit markets.
The jobs report showed a loss of 33,000 jobs in goods-producing industries during November while 127,000 jobs were created in service-providing businesses. Manufacturing industries continued to shed employees, cutting 11,000 jobs last month on top of the 15,000 that were dropped in October.
The average workweek was unchanged at 33.8 hours and overtime hours were steady in both October and November at 4.1 hours.