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Payroll Growth Shows U.S. Labor Market Healing Before Election

November 03, 2012

American employers hired more workers than forecast in October while an influx of people joining the labor force pushed the jobless rate higher, according to the last job market report before the presidential election.

Payrolls expanded by 171,000 workers following a 148,000 gain in September that was bigger than first estimated, figures from the Labor Department showed yesterday. October’s increase exceeded the highest forecast in a Bloomberg survey with a median projection of 125,000. Unemployment rose to 7.9 percent.

The broad-based job gains -- from positions at car dealers and hospitals to factories and construction sites -- indicate consumers will likely spend more freely, shoring up the three- year expansion in the face of a global economic slowdown and political gridlock in Washington over taxes and spending.

“This was a solid report,” said Dean Maki, chief U.S. economist at Barclays Plc in New York. “What was striking is that jobs grew in all the major sectors. The U.S. economy is better equipped to handle shocks now than it would have been this summer, when growth was slowing down and job growth was weakening.”

Stocks slipped yesterday, trimming a weekly gain. The Standard & Poor’s 500 Index fell 0.9 percent to 1,414.19 at 4 p.m. in New York.

President Barack Obama campaigned yesterday in Ohio, one of the battleground states that will decide the outcome of the Nov. 6 election. Noting that private-sector firms hired the most employees in eight months, he told a campaign rally in Hilliard, Ohio, that the country has “made real progress.”

Obama Economy

“The American auto industry is back on top, home values and construction is on the rise, we’re less dependent on foreign oil than any time in 20 years,” Obama said.

Republican challenger Mitt Romney said from Milwaukee that the jobless rate in October was higher than the 7.8 percent figure when Obama took office in January 2009.

“He said that the unemployment rate would now be 5.2 percent; today we learned that it is 7.9 percent,” Romney said after the figures were released. “It is 9 million jobs short of what he promised.”

The employment report showed private payrolls, which exclude government agencies, rose by 184,000 last month, the most since February. They were projected to advance by 123,000

Revisions added a total of 84,000 jobs to the payroll count in the previous two months and brought the average gains since June to 173,000. Increases in payrolls so far this year have averaged 157,000 a month, little changed from the 153,000 average for 2011.

Retailers Hiring

Retailers took on 36,400 employees last month, the most since April 2011, according to the report. Temporary hiring rose by 13,600. Government payrolls decreased by 13,000.

Construction companies added 17,000 workers last month, the most since January. Factories took on 13,000 people after a 14,000 decrease a month earlier, the report showed.

General Motors Co. (GM:US) is among manufacturers hiring as the U.S. auto industry makes a comeback after government bailouts during the depths of the financial crisis.

Detroit-based GM, the largest U.S. automaker, has said it will hire about 10,000 workers as part of its plan to bring more work in-house. The new so-called Innovation Center in Warren, Michigan, is one of four facilities planned in the U.S.

Auto Industry

The auto bailouts figure highly in a political campaign entering its final days as Obama and Romney contend for votes in Ohio, where one of every eight jobs is tied directly or indirectly to the auto industry.

One newly employed Ohioan, Micaela Padilla from Columbus, has been at work for about a week after searching since July. To help secure her position at the temporary agency where she works in fund raising for the Leukemia & Lymphoma Society, the 31- year-old took career classes at New Directions, a non-profit career counseling organization in her city.

“Looking for a job was challenging because when you really want to find something that fits you, you have to put in the leg work,” said Padilla, who dedicated 15 to 20 hours a week to the search. “It takes a lot of patience. I feel bad because so many people need a job.”

Obama also leads Romney by six percentage points in Iowa among likely voters and is out front by smaller margins in New Hampshire and Wisconsin, according to a NBC News/Wall Street Journal/Marist College poll published Nov. 1. The three states have 20 of the 270 Electoral College votes needed to win the White House.

Recent Polls

Nationwide, the most recent polls suggest the race is in a dead heat. A national ABC News/Washington Post tracking poll put Obama ahead by one point, 49 percent to 48 percent, within the survey’s margin of error of plus or minus three percentage points. The poll surveyed 1,293 likely voters from Oct. 28-31. An aggregation of national polls compiled by the website RealClearPolitics also showed a tied race, with each candidate at 47.4 percent.

Ronald Reagan is the only president to have been re-elected since World War II with a jobless rate above 6 percent. The rate was 7.2 percent on Election Day 1984, having dropped almost 3 percentage points in the previous 18 months. Through October this year, the rate has dropped 1.1 points in the same period under Obama.

Underemployment Rate

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 14.6 percent from 14.7 percent, according to the report.

Even with improving job prospects, compensation lagged behind. Average hourly earnings climbed 1.6 percent in October from the same time last year, the smallest gain since comparable year-over-year records began in 2007, the report showed. Earnings for production workers rose 1.1 percent in the 12 months to October, the weakest since records began in 1965.

Alison Cowley, 22, from Arlington, Virginia, started work in June at Appian Corp., a Reston, Virginia-based software developer, after graduating from the University of Maryland with a degree in mechanical engineering. She started her search last fall and accepted a position in February.

“Searching for a job was definitely stressful for the first couple of months,” said Cowley, who saw the help-wanted ad posted on the university’s career site. “It was nice to have a job by February, it was a real burden off my shoulders.”

Consumer Confidence

A healthier labor market has boosted consumer confidence, helping to drive the biggest increase in household spending in seven months in September. Consumer purchases account for 70 percent of the economy.

The Thomson Reuters/University of Michigan consumer sentiment index rose last month to the highest level since before the recession began five years ago. The Conference Board’s index reached the highest level since February 2008.

At the same time, the weak global economy and the so-called fiscal cliff -- more than $600 billion of tax increases and budget cuts scheduled to take effect next year unless Congress acts -- have prompted some companies to begin cutting back.

Unless the cliff is averted, “it’s going to be a major hit to consumer spending that could knock the economy back into recession,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh.

“So we still have that dark cloud hanging over the economy,” he said. “If that cloud is cleared up a little bit, and I expect it will be, then yes, I think these gains can be sustained.”

Warning that they can’t combat a slowdown in growth caused by stricter fiscal policy, Federal Reserve officials said Sept. 13 the central bank would hold its target interest rate near zero until at least mid-2015 to stimulate more hiring. The Fed also began a third round of stimulus, buying $40 billion in mortgage bonds a month.

To contact the reporter on this story: Alex Kowalski in Washington at

To contact the editor responsible for this story: Christopher Wellisz at

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