Employment Rose Sharply in October as Jobless Rate Fell
By DAVID LEONHARDT
Published: November 7, 2003
he longest hiring slump in more than 60 years finally appears to have ended.
Employment grew by 126,000 jobs in October, the best showing in nine months, the Labor Department reported today, and job growth in August and September was significantly stronger than the government had initially estimated. It was the first time since late 2000 that the economy added workers for three straight months.
The unemployment rate fell slightly in October, to 6 percent, from 6.1 percent the month before.
"This is as dramatic a turnaround as you could hope for," said Ian C. Shepherdson, the chief domestic economist at High Frequency Economics in Valhalla, N.Y.
Restaurants, real-estate companies, doctor's offices and most of the rest of the broad service sector added to their payrolls last month, apparently in response to the recent jump in household spending, economists said.
Manufacturers, still struggling against foreign competition, cut jobs for the 39th consecutive month, but the loss was the smallest since the early months of the streak.
The number of people working part-time because they could not find full-time work fell 139,000, to 4.8 million. Average hourly wages rose by just a single cent, but an increase in hours as businesses worked harder to keep up with rising demand fattened weekly paychecks.
The recent job gains remain modest by many measures. They are not large enough to keep up with the growth of the labor force, suggesting that last month's decline in the jobless rate might have been a statistical blip.
"This is at most the beginning of the end, not the end itself," Drew Matus, an economist at Lehman Brothers, wrote in a note to clients this morning. The labor market recovery "is still in its early stages and still somewhat fragile."
But the increases also represent clear progress after two and a half years of layoffs and weak hiring that sliced the nation's payrolls by more than 2.5 million jobs, the biggest decline since the early 1980's.
The report offered more good economic news for President Bush, who has credited the three tax cuts passed since 2001 with softening the economic slump and predicted that they would eventually lead to job growth.
"We're delighted," said N. Gregory Mankiw, the chairman of the White House's Council of Economic Advisers. "I think we'll see robust job growth going forward."
The employment gain complicates the task of the Democratic presidential candidates, who have the made the severe job losses a centerpiece of their campaigns. Representative Pete Stark of California, the ranking Democrat on Congress's Joint Economic Committee, noted that the current pace of job growth would need to continue for 19 months to return to the peak employment level reached in early 2001.
If the job gains continue, they will also increase the odds that the Federal Reserve will raise its benchmark short-term interest rate during the first half of next year. Since June, the Fed has kept the federal funds rate on overnight loans at its lowest level since 1958 in an effort to shock the economy out of its sluggishness.
Low interest rates have led to a surge in mortgage refinancing, giving many families more cash to spend, and also decreased the cost of many car loans, small business loans and other types of loans.
Stocks rose modestly after the release of today's employment report. By mid-morning, the Standard & Poor 500-stock index was up about two-tenths of 1 percent. Bond prices, meanwhile, were lower. The Treasury's benchmark 10-year note was down about half a point, while its yield rose to 4.47 percent, from 4.41 percent late Thursday.