Unemployment Drops to Five-Year Low
Data Fuels Debate Over Direction of the Economy
By Howard Schneider
Washington Post Staff Writer
Friday, November 3, 2006; 11:08 AM
Unemployment dropped to its lowest level in five years last month as U.S. employers added 92,000 new jobs, a sign of continued strength in the economy even as overall growth began to slow.
The jobless rated dipped to 4.4 percent in October, down from 4.6 percent in September and 4.9 percent a year ago, according to figures released this morning by the Department of Labor.
A hiring sign is posted at a McDonald's restaurant in Mountain View, Calif., Wednesday, Oct. 18, 2006. The productivity of American workers slowed to a standstill in the summer while wage pressures were rising at the fastest clip in more than two decades, a combination likely to raise inflation concerns at the Federal Reserve. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)
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The new statistics became immediate political fodder as the midterm campaign enters its final weekend. Republicans argued that the falling unemployment rate shows President Bush's economic policies have worked, while Democrats contended that job growth has lagged other recoveries.
Though the number of jobs added in October was less than expected, the Labor Department today also revised upward its employment figures for August and September, helping pull down the jobless rate.
According to those revised statistics, the economy added 230,000 jobs in August, compared to the 128,000 that the department initially reported, and added another 148,000 in September, compared to an initial report of 51,000.
The new data will fuel the debate over inflation and the direction of the economy, with some analysts saying it will raise fresh concerns about rising costs at a time when a series of Federal Reserve interest rate increases had seemed to be helping cool growth.
Last week, federal officials reported that economic growth between July and September had slowed to 1.6 percent on an annualized basis, the weakest performance in three years.
Yet labor markets remain tight and the cost of employment has been rising. A new report this week showing that productivity stagnated in recent months raised the prospect that businesses are paying more for workers without getting the same gains in output that have been typical -- a dynamic that could lead to either higher prices or lower profits.
The Labor Department reported today that average hourly earnings in October rose 6 cents, or .4 percent, to $16.91, up nearly 4 percent from a year before.
"The labor market looks tight -- and as long as unemployment is falling and rising unit labor costs threaten, the Fed will not be thinking of rate cuts. It may even have to hike again," said Nigel Gault, chief U.S. economist with the Global Insight consulting firm. The central bank over the summer paused in its program of interest rate hikes, but said it would watch closely for signs of whether inflation is under control.
The unemployment rate meant that 6.7 million people were without jobs and actively looking for work in October, 700,000 fewer than in October a year ago.
Hiring was strong among professional and business service firms, which added 43,000 jobs in October, and also in health care, which added 23,000. The manufacturing sector lost 39,000 jobs, while the construction industry shed 26,000 positions amid a housing slowdown.
The drop in unemployment was trumpeted quickly by Republican leaders hoping to retain control of the House and Senate in mid-term elections. Today's unemployment numbers are the last major economic statistic to be released before the Tuesday vote.
Bush administration officials scheduled briefings and statements throughout the day to argue that the new employment numbers show the president's economic policies are working. In a press release U.S. Senate Majority Leader Bill Frist (R-Tenn.) said the drop in unemployment showed the nation remained in the midst of "one of the longest periods of sustained economic expansion and job creation in our nation's history" -- a rebound from the technology bust and the terrorist attacks of 2001. |
