Lukewarm Jobs Report Awaits Americans as Election Nears

Tuesday, 30 Oct 2012 04:27 PM

 

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U.S. job growth likely picked up in October, but not enough to prevent the unemployment rate from rising off a near four-year low, although that might not matter for next week's presidential election.

Coming four days ahead of the tight contest, the closely watched employment report on Friday is not expected to shift much from its recent pattern, limiting its impact on voters.

Employers are expected to have added 125,000 jobs to their payrolls in October, up from 114,000 in September, according to a Reuters survey of economists. The unemployment rate is forecast to tick up a tenth of a percentage point to 7.9 percent after a dramatic 0.3 percentage point fall in September.

"Most people have an impression of the economy and their minds won't be changed at this late stage. Only a dramatic headline on either number in either direction might move the dial a bit more," said Harry Holzer, a public policy professor at Georgetown University in Washington.

The latest Reuters/Ipsos daily tracking poll showed the race between President Barack Obama and Republican challenger Mitt Romney as a virtual dead heat just a week before the Nov. 6 vote.

The Labor Department said it intended to release the October jobs data on Friday at 8:30 a.m. (1230 GMT), as scheduled, even though monster storm Sandy forced the government to shut down for two days.

Jobs growth has fizzled since accelerating in the first two months of this year. Economists point to fears over Europe's debt crisis, the prospect for a sharp tightening of the U.S. government's budget and a lack of clarity over financial and health care regulation.

"Consumers are spending, but businesses are cautious about hiring because there is a lot of uncertainty related to the election, the fiscal cliff and regulations," said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California.

The fiscal-cliff -- automatic tax hikes and government spending cuts that will suck about $600 billion out of the economy next year if Congress fails to act -- led businesses to cut spending in the third quarter for the first time in 1-1/2 years.

Although the economy has created more than 4 million jobs since the 2007-2009 recession ended, employment remains about 4.5 million jobs short of where it stood when the downturn started.

Persistently weak labor market conditions forced the Federal Reserve in September to launch a program to buy $40 billion worth of mortgage-backed securities every month until there is a sustained improvement in the labor market. It hopes the purchases will drive down borrowing costs.

October's projected job gains are within the range usually considered sufficient to keep the unemployment rate steady. However, the jobless rate, which in September fell below 8 percent for the first time since Obama took office, is expected to rise.

The household survey from which it is derived can be volatile month-to-month. In September, it showed employment increased by 873,000 -- the first rise in three months and the biggest since June 1983. That contrasted with the much more-subdued gains found by the larger survey of employers.

Economists do not expect the household survey to show such out-sized gains for October and anticipate any increase will be more than offset by a rise in the number of Americans entering the labor force to look for work.

While the composition of job growth from the employer survey is most likely to mirror September's, manufacturing employment is expected to snap back after falling for two straight months. Government payrolls are seen falling after three straight months of gains.

Temporary help jobs, often seen as a harbinger for permanent hiring, are expected to rebound as businesses gear up for the holiday season. While businesses are hunkering down, households appear little troubled by the impending fiscal cliff, with consumer confidence at five-year highs.

Construction employment is expected to show a fifth straight month of jobs gains, thanks to a pick up in home building activity, which has been supported by the Fed's ultra easy monetary policy stance.

With the overall pace of job growth still subdued, average hourly earnings are expected to rise a tepid 0.2 percent after gaining 0.3 percent the prior month. The average workweek is seen holding steady at 34.5 hours.

"This indicates that economic growth is pretty minimal and modest," said Sohn.

© 2014 Thomson/Reuters. All rights reserved.

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