Payrolls likely grew in October, jobless rate steady

By Lucia Mutikani

WASHINGTON (BestGrowthStock) – U.S. employers added jobs last month for the first time since May, the government is expected to report on Friday, but at such a slow pace that it is unlikely to make a dent in the lofty unemployment rate.

However, the closely watched monthly report, which the Labor Department will release at 8:30 a.m. (1230 GMT), could offer more signs of a tick up in sluggish economic activity.

Nonfarm payrolls rebounded 60,000 in October, a Reuters survey predicted, reflecting a modest rise in private hiring and a small drag on government employment from the departure of the few remaining temporary census workers.

Payrolls declined 95,000 in September and budget-pressured state and local governments, which shed 83,000 employees during that month, are a wild card in October’s prediction.

“It’s not a level of growth that pleases much anyone, particularly the millions that lost their jobs during the recession,” said Brian Levitt, an economist at Oppenheimer Funds in New York.

Private employment, which has averaged monthly gains of roughly 80,000 this year, is expected to have risen by 75,000 after a gain of 64,000 in September, but the jobless rate is seen holding at 9.6 percent for a third straight month.

Concern over the anemic job market was a factor behind the Federal Reserve’s decision this week to pump an additional $600 billion into the economy through government bond purchases to push interest rates down further and stimulate demand.

The U.S. central bank, which cut overnight interest rates to near zero in December 2008, had already bought about $1.7 trillion in government debt and mortgage-linked bonds.

Analysts say the economy needs to create at least 125,000 jobs a month to start bringing the unemployment rate down, but economic growth remains rather sluggish nearly 1-1/2 years into the recovery from the worst recession since the 1930s.

Anger over unemployment helped the Republican Party to wrest control of the House of Representatives from the Democrats in Tuesday’s election, which was viewed as a vote on President Barack Obama’s economic policies.

ACTIVITY FIRMING

But there are early signs growth is firming somewhat, with activity in both the manufacturing and service sectors rising in October. Economists said this bodes well for employment.

“We are seeing signs that momentum is picking up again,” said Jim O’Sullivan, chief economist at MF Global in New York. “So we do think that momentum is going to be up again in the employment numbers over the next three or four months.”

Employment in October was seen supported by the manufacturing sector, where firms are expected to have added jobs after laying off 6,000 workers in September. Construction, however, probably fell for a second straight month, consistent with the weakness in home building.

Overall, the goods-producing sector should see modest gains in payrolls after they fell by 22,000 jobs in September.

Private service-providing employment was seen hovering around 80,000 in October and economists will keep an eye on temporary hiring after it showed small gains in September.

Temporary help services is usually seen as a harbinger of permanent hiring, but some economists say strong gains may be a sign that more people are involuntarily working part-time.

“Our normal expectation is that temporary hiring will cool a little bit relative to other employment gains as the recovery matures,” said Zach Pandl, a U.S. economist at Nomura Securities International in New York.

“If you continue to see more strong gains there, it could be evidence of more structural temporary hiring.”

A total of 9.5 million people were working part-time for economic reasons in September. The length of the work week in October will also be watched for signals on whether part-time work was becoming a permanent feature of the labor market.

The average work week has barely moved this year and is seen at 34.2 hours for a fourth straight month in October.

“If it holds at this level it suggest a more structural change in the labor market, a shift toward involuntary part-time work due to sluggish demand,” said Pandl.

State and local government payrolls, which contributed to sinking government employment in September, could see a small bounce in October because the drop in the prior month partly reflected unusually weak hiring for teachers at the start of the school year.

However, MF Global’s O’Sullivan warned that the weak fiscal positions of state and local governments could mean their payrolls drop again, just not as sharply.

“Obviously the trend in state and local government is negative, but not negative to the point of minus eighty-three thousand a month, which is what happened last month,” he said.

Payrolls likely grew in October, jobless rate steady