The U.S. jobless rate unexpectedly fell in October while employers added the fewest workers in four months, reinforcing Federal Reserve Chairman Ben S. Bernanke’s prediction of a “frustratingly slow” recovery.
The unemployment rate dropped to a six-month low of 9 percent from 9.1 percent, even as more people entered the labor force. Payrolls rose by a less-than-forecast 80,000, following increases in the prior two months that were revised up by 102,000, Labor Department data showed yesterday in Washington.
The figures indicate the world’s largest economy will be able to weather risks such as the European debt crisis and political wrangling on cutting the U.S. budget deficit. Fed policy makers are forecasting “moderate” growth that won’t push unemployment below 8 percent until 2013, one reason why they are considering further stimulus to spur demand.
The employment gain is “enough for the economy to get along, and no more,” said Eric Green, chief market economist at TD Securities Inc. in New York, who correctly forecast the jobless rate. “Unemployment is going to remain well above what the Fed wants for the next two or three years. The high level of uncertainty has fostered caution. Companies are making do with very little labor.”
The jobless rate was forecast to hold at 9.1 percent, according to the median of 87 estimates in a Bloomberg News survey of economists. Payrolls were projected to rise by 95,000.
Sustained employment 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.
Stocks fell yesterday as concern about Europe eclipsed the decline in the jobless rate. 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 2.04 percent from 2.07 percent late the prior day.
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.
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, the world’s largest maker of household appliances, plans 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 revisions meant the report was better than it appeared based on October payrolls, Mohamed El-Erian, chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said yesterday in an interview on Bloomberg Television. At the same time, “the bad news is that we’re still in this unemployment crisis,” he said.
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 for the first time in three months, while construction companies cut 20,000 jobs, the most since January.
Service-providers added 90,000 positions, about the same as the average gain in the previous six months. Employment at retailers climbed by the most in three months.
Government payrolls decreased by 24,000 in October, most of which occurred at state and municipalities.
Average hourly earnings rose 0.2 percent to $23.19, while the workweek held at 34.3 hours.
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 those out of work, the lowest since November 2010, from 44.6 percent.
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 Nov. 1-2 meeting, said in a statement 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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