WASHINGTON (Reuters) - The U.S. jobless rate unexpectedly jumped to a 26-1/2-year high of 10.2 percent last month, adding to pressure on the Obama administration to do more to tackle unemployment even as signs of recovery mount.
The Labor Department said on Friday that employers cut 190,000 jobs in October, more than the 175,000 markets had expected but fewer than the 219,000 lost in September.
Taking some of the sting out of the report, job losses for August and September were revised to show 91,000 fewer jobs were lost than previously reported.
While that hinted at some improvement in labor market conditions, economists had looked for the jobless rate to rise to 9.9 percent from September's 9.8 percent.
"Unfortunately, the problem is becoming deeper and more protracted," Mohamed El-Erian, chief executive of bond giant Pacific Investment Management told Reuters. "It's not just the increase in the headline number. ... It's also about the longer-term nature of unemployment, the increase in underemployment, and the prospect for only a very gradual recovery."
Stocks erased early losses on the heels of the report, somewhat heartened by a lessening in the pace of monthly job losses. The report lifted prices for U.S. government bonds and the flight to safer assets initially boosted the U.S. dollar, but it later fell back.
President Barack Obama has called job creation priority No. 1, but his scope to take further steps to lift the economy is limited by record budget deficits.
Mounting unemployment could pose problems for the Democrats who control Congress as they head into congressional elections in November 2010. This week, Republicans wrested control of two state governorships away from Democrats in races where the weak economy figured prominently.
"President Obama promised jobs during his campaign for president, and the elections in Virginia and New Jersey on Tuesday were a clear referendum on his failure to deliver on this promise," said Republican National Committee Chairman Michael Steele.
ECONOMY GROWING, BUT LABOR MARKET LAGS
The U.S. economy grew at a 3.5 percent annual rate in the third quarter, likely ending the most painful U.S. recession in 70 years, but employers appear wary of the prospects for a strong, sustained recovery.
The Federal Reserve on Wednesday held overnight interest rates close to zero and said it would keep them extraordinarily low as long as excess economic slack and a lack of inflation warning signs prevailed.
Interest rate futures prices showed traders reduced their bets the Fed will begin raising rates in the middle of next year. The implied chances of a rate hike by the mid-2010 slipped to about 66 percent from 84 percent late on Thursday.
"I don't know how in the heck the Fed could justify tightening policy with the unemployment rate over 10 percent unless we have an imminent inflation danger, which based on everything I see is absent," said Keith Hembre, chief economist at First American Funds in Minneapolis.
A wider measure of labor-market slack, which includes both the officially unemployed and people who want work but who have given up searching, hit a record high of 17.5 percent.
The Labor Department's survey of households showed a loss of 589,000 jobs last month, leading to the big jump in the unemployment rate. Its larger survey of employers, however, found far fewer positions were cut.
Economist generally regard the survey of employers as a more trustworthy measure of the state of the labor market, although some argue that the household gauge may be offer a better reflection when the economy is climbing from recession.
Employer payrolls have declined for 22 consecutive months now and 7.3 million people have lost work since December 2007, when the recession started.
However, the pace of layoffs has slowed sharply from early this year. In January alone, nearly three-quarters of a million jobs were lost.
Job losses in October were widespread across almost all sectors, with education and health services and professional and business services bucking the trend.
Manufacturing employment fell 61,000 last month, while construction industries payrolls dropped 62,000.
The service-providing sector cut 61,000 workers in October and goods-producing industries slashed 129,000 positions. Education and health services added 45,000 jobs, while government employment was flat.
Offering one small glimmer of hope, the report showed an increase of 34,000 temporary help jobs, suggesting companies needed extra hands even if they were not prepared to hire permanently. It was the biggest increase in temporary help jobs since the economy fell into recession.
The average workweek, which closely correlates with overall output and gives clues on when firms will start hiring, was steady at 33 hours in October. Average hourly earnings rose to $18.72 from $18.67 in September.
Article Copyright World Entertainment News Network 2009 http://www.wenn.com/
Photo(s) Copyright Getty Images 2009.
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