US employment rate improves a bit

Monday, 7 November 2011 00:00 - - {{hitsCtrl.values.hits}}

WASHINGTON: US employment rose less than expected in October, but a drop in the jobless rate to a six-month low of 9 percent and upward revisions to prior months’ job gains pointed to a strengthening labor market.

Nonfarm payrolls rose 80,000 last month, the Labor Department said, missing economists’ expectations for a gain of 95,000.

However, figures for August and September were revised to show 102,000 more jobs than previously reported. In addition, the decline in the jobless rate from 9.1 percent in September came even as more people entered the labor force.

While job growth last month was less than expected, details of the report suggested the economy was gaining some momentum.

“It’s not a game-changer but when you take into account the upward revision to prior months and the drop in the unemployment rate, it’s a step in the right direction,” said John Canally, an economist at LPL Financial in New York.

“It’s about in line with the growth you’re seeing in the economy but it’s not enough to break us out of the range we’re in.”

U.S. stock index futures turned positive after the data and U.S. Treasury debt prices fell. The dollar extended losses against the euro.

The labor market is the Achilles heel of the economic recovery, and progress at putting 13.9 million unemployed Americans back to work remains painfully slow. It is a challenge for President Barack Obama, who faces a tough fight for re-election next year, though signs of a modest improvement could keep the Federal Reserve on the sidelines as it considers whether monetary policy needs to be looser to aid growth.

The U.S. central bank on Wednesday lowered its growth forecasts and raised its projections for unemployment. While the Fed announced no new measures to stimulate the economy, it said it was considering the possibility of additional mortgage debt purchases.

But with fears of another recession receding, the pressure for more monetary policy stimulus has eased somewhat. Europe’s debt crisis could, however, push the recovery off the rails. The debt crisis, which has rattled global financial markets and pushed consumer confidence to recession levels, remains far from being resolved, and investors are keeping a close eye on developments in Greece.

While the economy is now in its second year of recovery, only a fraction of the more than 8 million jobs lost during the recession have been recovered. The economy needs to expand at an annual rate of at least 2.5 percent over a sustained period and consistently add roughly 125,000 jobs to keep unemployment from rising.

Growth accelerated to a 2.5 percent rate in the third quarter from a tepid 1.3 percent in the prior period. But there are signs of progress. The average duration of unemployment retreated from a record high of 40.5 weeks hit in September.