Job growth springs back after hurricanes
Fri Dec 2, 2005 05:14 PM ET
WASHINGTON (Reuters) - The U.S. job market rebounded last month from a hurricane-induced slowdown as nonfarm employers added 215,000 workers, according to a government report on Friday that showed the economy on solid ground.
The closely watched Labor Department report also said the unemployment rate held steady in November at 5 percent, just off the four-year low of 4.9 percent hit in August.
"This fits with an economy which is just humming along here at close to potential," said Kathleen Stephansen, director of global economics at Credit Suisse First Boston in New York.
The report, which showed job growth widespread across industries, nearly matched expectations on Wall Street. But prices for U.S. stocks and government bonds came under pressure, as traders saw the data buttressing forecasts for further interest-rate hikes from the U.S. Federal Reserve.
Stock prices finished the day mixed. The blue chip Dow Jones industrial average closed down 35 points at 10,877, but the tech-heavy Nasdaq Composite posted a slight gain.
"It leaves the Fed right on course," said Steven Wieting, senior economist at Citigroup in New York. "There's really nothing here to dissuade them from bringing rates up to at least neutral levels" that neither spur nor inhibit growth.
The Fed has raised benchmark overnight rates 12 times over the past 17 months, bringing them to 4 percent from a basement level 1 percent. Markets look for quarter-point rate hikes at each of the next two Fed meetings on December 13 and January 31, and a better than even chance of a third in late March.
The jobs report was the latest in a string of data, including a report earlier this week putting economic growth at a robust 4.3 percent annual pace in the third quarter, that economists said underscored the economy's resilience.
"Despite the disruptions of Hurricanes Katrina, Rita, and Wilma, economic activity appears to be expanding at a reasonably good pace as we head into 2006," Fed Chairman Alan Greenspan told a conference in Philadelphia.
President George W. Bush, facing the lowest popularity ratings of his presidency in part over economic concerns, seized on the latest figures as a sign his policies had laid a strong foundation for growth.
"We have every reason to be optimistic about our economic future," Bush said. "This economy is in good shape."
While the November employment gains were robust, the report showed the job market had yet to fully regain ground lost to hurricanes that battered the U.S. Gulf Coast in late summer.
The department revised up its measure of employment for hurricane-ravaged September, saying payrolls expanded by 17,000 workers. Previously, it had reported they had shrunk 8,000.
However, job growth in October was a bit weaker than first thought as employers brought on only 44,000 new workers, not the 56,000 the department had reported a month ago.
Over the past three months, job growth has averaged just 92,000 a month, well below the 196,000 average for the first eight months of the year.
"The employment total is more or less fine but other indications were on the soft side," said Pierre Ellis, senior economist at Decision Economics in New York.
One weak spot was a decline in the length of the average workweek, which dipped to 33.7 hours from 33.8 hours.
Average hourly earnings rose 3 cents to $16.32 in November, building on an upwardly revised 10-cent gain in October. The October rise was the largest on records dating to 1964, although on a percentage basis it was only the biggest since a matching 0.6 percent increase in February 2001.
While the latest data suggested October's pay spike was an aberration, the year-on-year earnings increase moved up to 3.2 percent, the biggest 12-month rise since March 2003.
Economists said the recent step-up in wage growth suggested workers may no longer be losing ground to inflation.
"With gas prices plunging in the last month, and wage growth accelerating, workers may finally be poised to get a share of the gains from the recovery," Dean Baker, co-director of the Center for Economic and Policy Research, wrote.
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