WASHINGTON (Reuters) - Hiring slowed in October but the unemployment rate hit a six-month low and job gains in the prior two months were stronger than previously thought, pointing to some improvement in the still-weak labor market.
The employment report on Friday was the latest data to suggest the economy was gathering a bit of momentum and a further indication recession risks were fading.
Nonfarm payrolls rose a tepid 80,000 last month, the Labor Department data showed, below economists’ expectations for a gain of 95,000 and a slowdown from September.
But employers added 102,000 more jobs than previously estimated in August and September, and the jobless rate edged down to 9 percent after being stuck at 9.1 percent for three consecutive months, taking the sting out of the report.
“Hiring is not booming, but I don’t think there is any sign of recession. The risk of the economy falling into a second recession over the next six to 12 months has been reduced, but we still have a very long way to go,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania.
The household survey, from which the unemployment rate is derived, showed strong job gains for a third straight month that more than offset an increase in labor force as more Americans resumed the hunt for work.
For financial markets, the report was overshadowed by developments in Europe where rich nations appeared to back away from a plan to broaden a euro zone bailout fund and the Greek government teetered on the edge of collapse.
U.S. stocks ended down, but prices for Treasury debt and the dollar rose, tapping flight to quality bids.
The labor market remains the Achilles heel of the U.S. recovery, and progress putting the 13.9 million unemployed Americans back to work remains painfully slow.
The slight improvements hinted at by Friday’s report will likely do little to take the pressure off President Barack Obama, who faces a tough fight for re-election next year.
However, they may be enough to keep the Federal Reserve on the sidelines for a while as it considers whether the economy could benefit from a further quantitative easing of monetary policy.
“The latest data is strong enough that it will kill off thoughts of a QE3 Christmas present for global markets,” said Alan Ruskin, global head of G10 foreign exchange strategy at Deutsche Bank in New York.
The U.S. central bank on Wednesday lowered its growth forecasts, raised projections for unemployment, and said it was considering additional mortgage debt purchases. Fed Chairman Ben Bernanke said officials were eyeing Europe warily.
Many economists believe weak economic and job growth will eventually compel the Fed to ease monetary policy further. Sixteen out of 19 big bond dealers expect more monetary stimulus, according a Reuters survey on Friday.
While hourly earnings rose 5 cents last month, they have risen only 1.8 percent over the past 12 months, too little to raise concerns on inflation for the Fed.
Even though the economy is in its second year of recovery, only about a quarter 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 a month just to keep up with new people entering the workforce.
Vice President Joe Biden said while the improvement was welcome, more still needed to be done. “There’s still a gigantic hole to be filled,” he said.
The Obama administration has struggled to come up with policies to generate sufficient employment amid stiff opposition from Republicans over more spending.
But there are signs of progress.
A broad measure of unemployment, which includes people who want to work but have given up looking for jobs and those working only part time for economic reasons, fell last month after scaling a nine-month high in September.
In addition, the average duration of unemployment retreated from a record high of 40.5 weeks hit in September.
Last month, private employers added 104,000 workers, more than offsetting a drop in government payrolls of 24,000. Public employment has fallen nearly every month this year as state and local governments grappled with budget constraints.
In the private sector, job gains were almost across the board, though construction fell 10,000 after a surprise addition of 27,000 jobs in September.
Manufacturing payrolls rose 5,000 after a slight decline in September. Factory hours also increased, a positive sign for a sector that has supported the recovery. In the service sector, retail employment added to the prior month’s gains.
There were also gains in professional and business services, and temporary employment, which rose 15,000. Economists often look to temporary hiring as a harbinger of increased permanent employment.
Hiring in the healthcare and social assistance sector, which has been boosted by the swelling ranks of retirees, rose 16,300. However, the gain was less than the prior months.
Additional reporting by Matt Spetalnick; Editing by Neil Stempleman and Diane Craft