U.S. Jobs Gains Show ‘Frustratingly Slow’ Growth
The U.S. jobless rate unexpectedly fell in October while employers added fewer workers than forecast, illustrating the “frustratingly slow” progress cited by Federal Reserve Chairman Ben S. Bernanke this week.
The unemployment rate fell to a six-month low of 9 percent from 9.1 percent, even as the labor force grew. The 80,000 increase in payrolls followed gains in the prior two months that were revised up by 102,000, Labor Department figures showed today in Washington.
“We’re making progress at a very slow pace,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, whose forecast for a gain of 85,000 jobs was among those that came closest to the result. “It indicates continued consumer spending, getting a little better over time.”
The report shows the world’s largest economy is maintaining its expansion in the face of risks such as the European debt crisis and political wrangling on reducing the U.S. budget deficit. Fed policy makers are forecasting “moderate” growth that won’t push unemployment below 8 percent until 2013 at the earliest, one reason why they are considering further steps to boost the economy.
Stocks fell as the decline in the jobless rate was overshadowed by a disagreement on boosting the International Monetary Fund’s resources to fight Europe’s debt crisis. The Standard & Poor’s 500 Index dropped 0.6 percent to 1,253.23 at the close of trading in New York. The yield on the benchmark 10- year Treasury note declined to 2.03 percent from 2.07 percent late yesterday.
The unemployment rate was forecast to hold at 9.1 percent, according to the median of 87 forecasts in a Bloomberg News survey of economists. Payrolls were forecast to rise by 95,000.
Sustained payroll increases of around 150,000 a month are needed to bring unemployment down about half a percentage point over a year, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Even so, “this labor market recovery is for real despite the economy having everything but the kitchen sink thrown its way,” Rupkey said.
Faster hiring would spur bigger gains in incomes and bolster confidence, helping cushion against declines in home prices and allowing households to sustain their spending. Household purchases grew at a 2.4 percent annual rate in the third quarter and the economy expanded at a 2.5 percent pace, the Commerce Department reported last week.
President Barack Obama used the employment report to call on Congress to approve his $447 billion jobs plan, which includes tax cuts and spending on infrastructure.
The U.S. economy is “underperforming,” Obama said at a news conference in Cannes, France, where he attended a meeting of leaders from the Group of 20 nations. The Labor Department’s figures “were positive but indicate once again that the economy’s growing way too slow.”
Macy’s is among those betting last quarter’s gain in spending will be sustained during the November-December holiday shopping season. The second-biggest U.S. department-store chain is stepping up hiring of mostly part-time employees by 4 percent for the period.
Whirlpool Plans Cuts
Whirlpool, the world’s largest maker of household appliances, said it planned to cut more than 5,000 jobs and trimmed its earnings forecast. The reductions will be primarily within North America and Europe and include the closure of the refrigeration manufacturing site in Fort Smith, Arkansas, by mid-2012.
“We are taking necessary actions to address a much more challenging global economic environment,” Chief Executive Officer Jeff Fettig said in a statement on Oct. 28.
The payroll revisions for September and August put those numbers closer to the bigger gains in hiring seen in the separate survey of households. The latter showed a 277,000 increase in employment for October.
“The good news is the report, in relative terms, was better than expected, mainly because of the revisions to August and September,” Mohamed El-Erian, chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said in an interview on Bloomberg Television. “The bad news is that we’re still in this unemployment crisis. It doesn’t do enough to remove the risk of stall speed, which is growth but not fast enough growth.”
Private hiring, which excludes government agencies, rose by 104,000 after a revised gain of 191,000. It was projected to advance by 125,000, the survey showed.
Factory payrolls rose by 5,000, the first increase in three months, and construction companies cut 20,000 jobs.
Employment at service-providers increased 90,000 after a 129,000 gain. Retailers added 17,800 employees, the most in three months.
Government payrolls decreased by 24,000. State and local governments cut employment by 22,000, while the federal government trimmed 2,000 workers.
Average hourly earnings rose 0.2 percent to $23.19, while the workweek held at 34.3 hours, today’s report showed.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- dropped to 16.2 percent from 16.5 percent.
The report also showed a decrease in long-term unemployed Americans. The number of people jobless for 27 weeks or more fell to 42.4 percent as a share of all those without work from 44.6 percent. It was last lower in November 2010.
The number of temporary workers increased 15,000 after rising 21,100 the prior month. Payrolls at temporary-help agencies often slow as companies seeing a steady increase in demand take on permanent staff.
Uncertainty over the amount and speed of reductions in government spending is weighing on businesses as the Nov. 23 deadline looms for the congressional supercommittee charged with finding at least $1.2 trillion in deficit savings. In the fiscal year ended Sept. 30, the government reported the second-highest annual deficit on record, $1.3 trillion.
Fed policy makers, who refrained from taking additional steps to ease monetary policy at their meeting this week, said in a statement that there are “significant downside risks to the economic outlook.”
The central bank’s latest forecasts showed less optimism about the economy and employment. Policy makers project growth next year of 2.5 percent to 2.9 percent, with unemployment in the 8.5 percent to 8.7 percent range. Joblessness in 2013 is forecast at 7.8 percent to 8.2 percent.
Additional stimulus “remains on the table,” Bernanke said at a Nov. 2 press conference in Washington, declining to specify conditions that would prompt a move. “While we still expect that economic activity and labor market conditions will improve gradually over time, the pace of progress is likely to be frustratingly slow.”
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