Updated from 8:47 a.m. EST
The economy shed 5,000 jobs in October and the unemployment rate ticked up to 5.7%, the Labor Department said Friday, both roughly in line with expectations for a weakening employment outlook.
"The report corroborates the general tone of the numbers over the last two months," said Josh Feinman, an economist at Deutsche Asset Management. "The economy has lost momentum."
The Labor Department report comes on the heels of weaker-than-expected growth in third-quarter gross domestic product, a plunge in consumer confidence and, most recently, signs that the manufacturing sector remains weak. Friday's data suggests that the economy continues to struggle heading into a key meeting of the
policy-making arm next Wednesday.
The dip in payrolls follows a revised 13,000 decrease in September, making it the first back-to-back contraction in six months. For the 27th month in a row, jobs were lost in the hard-hit manufacturing sector, which gave up an additional 49,000 jobs in October.
In a separate report, the Institute for Supply Management's index of manufacturing activity fell to 48.5 in October from 49.5 in September. A reading below 50 indicates contraction in the factory sector.
"The sector lacks drivers at this point," said Norbert Ore, director of the ISM survey, in a statement.
Following the release of the two pieces of data, fed funds futures, a good gauge of rate policy, upped odds of 25 basis-point rate cut to 100%, and they further placed a 50% chance on a 50-basis-point cut.
After its last monetary policy meeting, the Fed, which has alreadybrought down interest rates to their lowest level in over 40 years, said it would be monitoring weakness in the economy.
"The pressure on the Federal Reserve is tremendous," said Christopher Low, an economist at First Tennessee Capital Markets.
Within the employment report, the average workweek, a measure of hiring needs among employers, shrank to 34.1 hours in October from 34.2 hours in September. Average hourly earnings rose 3 cents, or 0.2%, to $14.89 in October, after a 0.2% increase in the previous month.
Service employment rose by 70,000 in October, with retailers adding14,000 jobs. The construction industry lost 27,000 jobs, transportationlost 4,000 jobs, and wholesalers lost 16,000 positions.
The weak report elicited comments from President Bush at a Republican rally in Pennsylvania. "It looks like some more Americans are looking for work and that's a problem," he said.
A barrage of bad economic news has been reported in the last week. The consumer confidence index, for instance, came in last Tuesday at its worst level in nine years. The latest weekly tally on jobless claims shows that they rose to 410,000, above the 400,000 forecast. And the Chicago purchasing managers reported Thursday that their index fell to 45.9 in October from 48.1 in September.
Layoffs have been plentiful in October, with
J.P. Morgan Chase
among the latest to pare back their workforces.
"Things are stalling out as companies under pressure to increaseearnings performance in the short run are cutting costs," said DaveGreenlaw, an economist at Morgan Stanley Dean Witter.