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Payroll Growth Jumps, Helped By Hurricanes

Employers have added jobs for 14 months in a row, for a combined total of 2.2 million since August last year. But by the end of last month, the nation had 371,000 fewer payroll jobs than when Bush was inaugurated in January 2001. If the recent average pace of job growth continues through the end of the year, that deficit would be erased by his second inauguration, in January.

The employment figures gave encouragement to many economists who had worried recently that rising energy prices would sharply depress job growth and consumer spending.

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Bureau of Labor Statistics: October 2004 Employment Situation

"Clearly, uncertainties are diminishing and we are beginning to see some light at the end of the tunnel," said Sung Won Sohn, chief economic officer of Wells Fargo Bank, referring to oil prices and the fears of terrorism that had hung over the country in the months preceding the presidential election. Many economists had blamed such uncertainties for the sluggish job growth of the summer, which appeared to reflect continued business cautiousness despite healthy profits and cash flow.

The employment report shows the economy "is doing a little better than we thought," said James E. Glassman, senior economist at J.P. Morgan Securities Inc.

Since the hurricanes probably forced down the September employment figures somewhat, economists looked to the average gains over the past three months for a sense of the underlying trend. Employers added an average of 225,000 payroll jobs a month from August through October, a pace well above the roughly 150,000 monthly gain that many economists estimate is needed to keep up with the growth of the labor force.

One of the clearest signs of the hurricanes' effects was the 71,000 construction jobs added in October -- more than one of every five new jobs -- after adjusting for seasonal variation. Many of those were added in the Southeastern states most affected by the storms.

Temporary staffing firms added 48,000 jobs, many of them to help with the post-hurricane work.

"We're seeing a pickup in jobs due to reconstruction," said Stacey Burke, spokeswoman for Labor Ready Inc., a temporary staffing firm for laborers. "Essentially anyone looking for work who is qualified could find it in [Florida] right now."

Professional- and business-services firms, schools, health care providers, retailers and employers in the leisure and hospitality industries all added jobs last month.

One weak spot was manufacturing, which shed 5,000 jobs in October, following a drop of 14,000 in September, the Labor Department report showed. The length of the average manufacturing workweek and the average weekly amount of manufacturing overtime both slipped slightly.

The unemployment rate for blacks rose to 10.7 percent last month from 10.3 percent the prior month. The rate for Hispanics and Latinos fell to 6.7 percent from 7.1 percent. White joblessness held steady at 4.7 percent.

Analysts and traders assume the Fed will lift the funds rate at its policymaking meeting Wednesday to 2 percent from 1.75 percent. That would mark the fourth consecutive quarter-percentage-point increase in the rate since June, when it was at an extremely low 1 percent. At 2 percent, the rate would still spur growth, but with less danger of fueling future inflation.

Fed officials generally believe the economic expansion is continuing on track after slowing suddenly in the early summer. But some policymakers also have suggested they might pause after Wednesday and slow the pace of subsequent rate increases if the economy loses steam.

The strong October jobs report raised the odds of another rate increase in December, several economists said.

"The Fed will keep moving in small steps," Glassman said. "The Fed's view -- that the worst is over and the economy is regaining traction -- is probably the right idea."

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