Tiny October Rise in Average Earnings Thrills Wall Street

The October jobs report showed in-line jobs growth and a drop in the unemployment rate, but traders are keying on a smaller-than-forecast uptick in wages.
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The October

employment report

gave the Street almost exactly as much job growth as it was looking for, combined with an unexpected drop in the

unemployment rate

whose potentially negative implications for interest rates were neatly offset by a smaller-than-expected rise in earnings.

Nonfarm payrolls gained 310,000 in October, barely missing the


average forecast of 313,000.

The unemployment rate, which had been expected to remain at 4.2%, dropped to 4.1%, a level it hasn't seen since January 1970. But

average hourly earnings

, which had been forecast to rise 0.3%, added just 0.1%, quelling fear that the tight labor market is forcing employers to pay up for workers. Higher wages for workers can lead to higher inflation, as producers raise prices to cover their rising costs.

The payrolls gain reflected a familiar mix of strength in the service and construction sectors and weakness in manufacturing. The service sector added 293,000 new jobs, compared to a 12-month average gain of 238,000. Construction added 28,000, compared to an average over the last year of 22,000. And manufacturing lost 15,000 jobs, compared to a monthly average loss of 28,000.

The total gain was significantly above its 12-month average of 227,000, which was expected as a payback for the extraordinary weakness of the September jobs report, which was largely due to Hurricane Floyd. Initially, the

Labor Department

reported a net loss of 8,000 jobs in September. This morning, it revised that to a 41,000 gain.