Job market struggles to regain footing after Hurricane Katrina

WASHINGTON -- The job market is struggling to regain its balance after getting knocked over by Hurricane Katrina. Employers, coping with high energy prices and shaken by two other hurricanes, showed caution in hiring in October.

Following September's job loss -- the first decline in employment in two years -- employers boosted payrolls by just 56,000 last month. The rebound lacked oomph, falling well short of the roughly 100,000 jobs gains many economists were forecasting.

"Elevated energy prices, questionable holiday spending and the rising interest rate environment are sending yellow caution flags around many corporate board rooms," said Richard Yamarone, economist at Argus Research.

The unemployment rate, meanwhile, edged down to 5 percent in October as some people opted to leave the civilian labor force for any number of reasons. The jobless rate in September had crept up to 5.1 percent.

The latest report on the nation's employment climate, released by the Labor Department on Friday, showed that the job market is slowly on the mend from the punches thrown by the storms but still isn't back to full health.

"The economy has weathered these storms about as gracefully as could be expected," said Mark Zandi, chief economist at Economy.com.

On Wall Street, stocks eked out small gains. The Dow Jones industrials closed up 8 points.

Job losses in September turned out to be just 8,000. That was smaller than the 35,000 decline initially estimated and suggested that damage to the job market from Katrina, the most costly natural disaster in U.S. history, wasn't as terrible as many had feared.

On the other hand, job gains in August weren't as robust as previously thought. Employers added 148,000 positions in August -- 63,000 less than estimated a month ago.

A wage barometer that economists monitor for signs of inflation picked up strongly.

Workers' average hourly earnings rose to $16.27 in October, up 0.5 percent from September. Wage gains are good for workers and can fuel spending, an important ingredient to the economy's good health. But a rapid pickup in wage growth can lead economists to fret about inflation. The 0.5 percent increase was the largest since February 2003, when hourly earnings rose by the same amount.

To fend off inflation, Fed policy-makers on Tuesday bumped up a key interest rate to its highest level in more than four years. More rate increases are expected.

Federal Reserve Chairman Alan Greenspan, appearing before Congress on Thursday, said fallout from a trio of late-summer and fall hurricanes should be temporary and that the expansion remains firmly planted.

Katrina, Rita and Wilma are likely to "exert a drag" on employment and production in the short term and may aggravate inflation pressures, Greenspan said, "but the economic fundamentals remain firm, and the U.S. economy appears to retain important forward momentum."

The Fed chief will retire on Jan. 31 after 18-plus years running the central bank.

For October, "job growth in the remainder of the country (outside the hurricane zone) appeared to be below trend," said Kathleen Utgoff, commissioner of the Bureau of Labor Statistics. "It is possible, of course, that employment growth for the nation could have been held down by indirect effects of hurricanes Katrina and Rita, for example, because of their impact on gas prices," she said.

Among the businesses cutting jobs in October were: retailers, including department stores and auto dealers; hotels and motels, and bars and restaurants. Those losses, however, were blunted by gains in, among other things, construction, helped by hurricane rebuilding and cleanup; manufacturing, largely reflecting the return Boeing workers after a strike; health care; financial activities; and government.

The latest jobs picture comes as President Bush is confronted with sagging job ratings.

Bush's job approval is at the lowest level of his presidency. A new AP-Ipsos poll showed Bush's approval rating dipped to 37 percent, compared with 39 percent just a month ago.

The Bush administration said the fact that the employers added jobs in October -- after the jolts of the hurricanes -- was evidence of the economy's underlying strength. But Democrats expressed concerns about the pace of job creation.

Katrina slammed into the Gulf Coast on Aug. 29. Rita barreled into the region on Sept. 24. Those storms battered crucial oil and gas facilities, choked off commerce and destroyed businesses. Wilma, which hit on Oct. 24, caused widespread power outages and property damage across Florida.

While Katrina had a visible impact on employment, Rita's bite was minimal, the Labor Department said. The figures released on Friday don't capture the impact of Wilma because the employment information was collected before the hurricane hit.

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On the Net:

Employment report: http://www.bls.gov/