Analysis: Services jobs come roaring back

By Emily Kaiser

WASHINGTON (BestGrowthStock) – A stronger-than-expected U.S. October employment report suggests the economy is pivoting toward services-led growth after more than a year of manufacturing-driven gains.

Considering that services account for the overwhelming majority of U.S. jobs, that bodes well for the long-suffering labor market. However, October’s pace of job creation would need to be sustained for months to make any reasonable dent in the unemployment rate.

For the U.S. Federal Reserve, which announced a new $600 billion bond-buying campaign this week, a steady run of job gains at this level could mean that the money printing stops there. Many economists have speculated that the Fed would extend the program beyond its planned June 2011 completion if the job market remained in the doldrums.

THE GAINERS

* The total private payroll gain of 159,000 reflected strong gains in retail stores, temporary jobs, health care and food and drink establishments.

* This matches up with the recent run of stronger-than-expected figures for consumer spending, which helped lift third-quarter economic growth.

* The Labor Department’s report also suggests discretionary spending may be picking up. Personal and laundry services added a little more than 11,000 jobs.

* The ADP Employment Report on Wednesday foreshadowed some of these gains. It showed sizeable job growth at small- and medium-sized services companies but a decline in manufacturing.

THE LOSERS

* Government. This marked the last month of temporary census jobs significantly skewing the readings. Now the biggest uncertainty is state and local government jobs.

* Unlike the federal government, most states have balanced budget rules so when revenues shrink, spending must fall.

* State payrolls were flat in October, while local governments shed 7,000 jobs. This was a smaller decline than some economists had predicted.

* Municipalities added 7,800 teachers last month after huge declines in September. Some of that may reflect seasonal adjustments, so economists will be watching November figures closely to better gauge the government job market.

* Arts, entertainment and recreation showed a sharp drop as well, which runs counter to some of the other signals that discretionary spending was improving.

(Editing by Chizu Nomiyama)

Analysis: Services jobs come roaring back