Economists, who had predicted an increase of 100,000 jobs in October, were disappointed with the numbers.
Kathleen Utgoff, Commissioner of the Bureau of Labor Statistics, said the October numbers were due to softness in the labor market. "Job growth in the remainder of the country appeared to be below trend in October," Utgoff stated in a presentation to the Joint Economic Committee of Congress. She indicated that high gas prices may have deterred employers from hiring. Utgoff did note one positive side effect of the hurricanes: 33,000 more construction jobs in October, due to the reconstruction of the storm-ravaged areas.
Carl Tannenbaum, chief economist at LaSalle Bank, suggested that a wait-and-see approach may have slowed hiring. "Aside from companies not being able to operate because of the hurricanes, many businesses might have been in a state of suspense, as they assessed damage to their operations and to the economy that might have resulted from these storms," Tannenbaum said.
While economists agree that the storms are affecting the numbers, some feel that the overall employment numbers are fine. "There probably is a lingering Katrina effect," Beata Caranci, economist at TD Bank Financial Group, said. "There had been a decent pace of job growth until August, and this suggests there is some impact [from Katrina] feeding through. It may take a while to unwind. If we see a bounce back, it might be in November or maybe in December."
Workers got good news with the announcement that the average hourly wage rose eight cents to $16.27, a move that concerns inflation-leery investors and economists. The hourly wage has increased 2.9% in the last 12 months, countering the below-trend employment figures. Another report shows that worker productivity for the third quarter has risen 4.1%, which offsets the wage increase and soothes investors' concerns.
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Despite these increases, employees are still behind the Consumer Price Index, which has risen 4.7% in the last year. The significant rise of gas prices contributed to the jump in the index.
Earlier in the week, retiring Federal Reserve Chairman, Alan Greenspan, announced an increase in the interest rate to 4%—the highest level in four years. Interest rates have been raised 12 times since mid 2004 in an effort to keep inflation at bay.
Greenspan told Congress that the hurricanes would have a short-term effect on employment numbers and inflation pressures. "But the economic fundamentals remain firm, and the U.S. economy appears to retain important forward momentum," Greenspan said.
President Bush, at the Americas Summit in Argentina when the report was released, responded to the numbers by saying, "The United States' economy is strong. It's healthy."
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