WASHINGTON, Nov. 5 (UPI) -- The U.S. economy posted a surge in hiring in October which increased the odds that the Federal Reserve will deliver a steady diet of rate increases rather than pausing in its tightening cycle after its next meeting.
The U.S. Labor Department said Friday employers hired workers at the fastest clip in six months in October, lifting non-farm payrolls b7y a robust 337,000 in October, more than twice the revised increase posted in September.
Labor also revised its estimates of payrolls growth for September and August, saying employers added 156,000 more jobs than previously thought. That brought the total of jobs created over the last 13 months to 2.2 million.
Analysts said the report helped validate the Federal Reserve's view that the economy is regaining traction and making the central bank less likely to halt its campaign of interest-rate increases.
Experts said the Labor report increases the chance of a rate hike in December from the policy-making Federal Open Market Committee.
A rate increase from the FOMC next Wednesday has long been anticipated, but Wall Street economists have been more split on the prospect of a December tightening.
Federal funds futures traders are assigning a 100 percent chance of a 25-basis-point rate increase at the Nov. 10 FOMC meeting and an 80 percent probability for the Dec. 14 gathering, up from 54 percent before the labor news was released.
The employment report is a set of labor market indicators.
The unemployment rate measures the number of unemployed as a percentage of the labor force.
Non-farm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments.
The average workweek reflects the number of hours worked in the non-farm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in non-farm payrolls.
The anticipation on Wall Street each month is palpable, the reactions are dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working.
These numbers are the best way to gauge the current state and future direction of the economy. They also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed chairman Alan Greenspan talks about this data frequently and watches for inflation constantly.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events.
ExpertS said the strong job creation suggested the Fed will continue its campaign of interest-rate increases, raising the key federal funds rate by a quarter percentage point to 2 percent when its policy makers meet next week.
Since June, the Fed has raised the funds rate three times in a campaign to gradually to restore it to a level more appropriate for an economy in recovery. The rate increases, however, began just as the pace of job creation faltered. Economists say a normal job-creation rate for an economy in recovery is about 240,000. From June through September, however, the average was a meager 129,500.
That sluggish performance boosted expectations on Wall Street that the Fed would take a break from its interest-rate campaign in December.
Some Fed policy makers acknowledged that was a possibility. "If a slowing of the economy, for example, justifies a pause (in the campaign), that certainly will be the response," Fed Governor Ben Bernanke said last month.
But economists say the latest economic data leave little doubt the labor market is on the upswing.
Over the last 13 months, employers have restored more than 80 percent of the 2.7 million jobs cut over the previous 2 1/2 years. If economists' expectations of job growth over the next few months prove correct, all of the lost jobs could be restored by the time President Bush is inaugurated to a second term in January.
Under those circumstances, the Fed isn't likely to halt its campaign of interest-rate increases, analysts said.
The latest report showed the manufacturing workweek fell by six minutes to 40.7 hours and overtime fell by the same amount to 4.5 hours.
Average weekly hours worked by production workers held at 33.8 hours for a second month, matching the forecast.
Incomes rose last month. Workers' average hourly earnings increased 0.3 percent, or 5 cents, to $15.83 after 2 cent gain in September.
Economists had expected a 0.3 percent increase in hourly wages.
Average weekly earnings rose to $535.05 last month from $533.06. Hourly earnings rose 2.6 percent in October from the same month last year, the biggest 12-month increase since August 2003.
Labor said hurricanes in the country's Southeast contributed to a 71,000 increase in construction, the biggest increase since March 2000, as well as other jobs related to clean-up efforts.
The strong job growth drew previously discouraged workers back into the civilian labor force, expanding it by 367,000 to 147.9 million. The unemployment rate rose a tenth of a percentage point to 5.5 percent.
Economists on Wall Street had expected a 192,000 increase in payrolls and a 5.4 percent unemployment rate.
The report showed the service-producing industry added 272,000 jobs in October, the largest increase since April. Within that category, the professional and business-services industry -- which includes temporary services -- added 97,000 jobs, the biggest increase since April. The construction industry added 71,000, the biggest increase since March 2000.
The manufacturing industry, however, shed jobs for a second month in a row. Manufacturing jobs declined by 5,000 last month after a 14,000 decline in September.
Labor also revised its estimates of job growth for August and September, saying employers added 198,000 jobs in August and 139, 000 in September. Previous estimates had shown a 128,000 increase in August and a 96,000 increase in September.
Labor said 8.1 million people remained unemployed in October. The number of people who have been jobless for 27 weeks or more rose to 1.79 million from 1.75 million in September.
Among blacks, the unemployment rate rose to 10.7 percent from 10.3 percent in September. The jobless rate for Hispanics fell to 6.7 percent from 7.1 percent and for whites it held at 4.7 percent.
Unemployment among teenagers rose to 17.2 percent last month from 16.6 percent. The jobless rate rose to 4.8 percent from 4.7 percent for women and fell to 4.9 percent for men from 5 percent, the government agency said.
