October Job Growth Misses Estimates

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A smaller-than-expected 56,000 new U.S. jobs were created in October despite the fading impact of Hurricane Katrina (search), while total job growth over the two prior months was revised lower, a government report on Friday showed.

The report buoyed prices for U.S. Treasury securities as investors hoped it might make the Federal Reserve more reluctant to keep raising U.S. interest rates, but stock futures and the dollar dived.

The picture it painted of national labor markets was not entirely bleak, as hourly earnings rose and the jobless rate eased, and it was clouded by the department's effort to assess the impact on jobs of hurricanes in August and September.

The national unemployment rate eased to 5 percent from 5.1 percent in September as the national labor force shrank for the first time since January. Wall Street economists had forecast that 100,000 jobs would be created last month and the unemployment rate would be unchanged.

"The underlying economic fundamentals remain sound as has been pointed out by the Fed," said Alan Gayle, a managing director of Trusco Capital Management (search) in Atlanta, though fourth-quarter growth may suffer. "You can't have this kind of slowing in job growth coupled with rising energy prices and not see some adverse impact on consumer spending.

The Labor Department revised data for August and September. It said that 148,000 jobs were created in August instead of 211,000 that it previously thought and 8,000 jobs were lost in September instead of 35,000. As a result, 36,000 fewer jobs were created over the two months than the department previously estimated.

Bureau of Labor Statistics Commissioner Kathleen Utgoff said the relatively weak increase in jobs last month could not be blamed on Hurricane Katrina, the storm that devastated the Gulf Coast region in late August. "Rather, job growth in the remainder of the country appeared to be below trend in October," Utgoff said.

The department said its survey of businesses used to gather payroll employment data did not appear to be significantly affected by two other hurricanes in the Gulf Coast area, Rita and Wilma.

Average hourly earnings gained to $16.27 from $16.19 in September. Notably, some 49,000 jobs were created in goods-producing industries last month, a bounceback from September when 13,000 were lost.

"I don't think this is a bearish report because average hourly earnings are ticking up significantly, said Firas Askari, manager of foreign exchange trading for BMO Nesbitt in Toronto. "That is obviously a direct driver of inflation."

Fed Chairman Alan Greenspan (search), testifying before Congress on Thursday, indicated he was confident about the economy's prospects for steady growth but said the outlook for potential inflation was more troublesome.

The Fed has raised U.S. short-term interest rates 12 times since mid-2004 — most recently on Tuesday when it boosted its trendsetting federal funds rate to 4 percent — and has not signaled any intention to call a halt in the near future.