WASHINGTON (Reuters) ? U.S. hiring slowed in October but the unemployment rate hit a six-month low and job gains in the prior two months were stronger than previously thought, pointing to some improvement in the still-weak labor market.
The employment report on Friday was the latest data to suggest the economy was gathering a bit of momentum and a further indication recession risks were fading.
Nonfarm payrolls rose a tepid 80,000 last month, the Labor Department data showed, below economists' expectations for a gain of 95,000 and a slowdown from September.
But employers added 102,000 more jobs than previously estimated in August and September, and the jobless rate edged down to 9 percent from 9.1 percent, taking the sting out of the report.
"Hiring is not booming, but I don't think there is any sign of recession. The risk of the economy falling into a second recession over the next six to 12 months has been reduced, but we still have a very long way to go," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania.
The household survey, from which the unemployment rate is derived, showed strong job gains for a third straight month, more than offsetting an increase in labor force as more Americans resumed the hunt for work.
For financial markets, the report was overshadowed by developments in Europe where rich nations appeared to back away from a plan to broaden a euro zone bailout fund. Stocks on Wall Street were down more than 1 percent in morning trade.
Prices for U.S. Treasury debt rose and the dollar firmed across the board, tapping flight to quality bids.
SLOW PROGRESS
The labor market remains the Achilles heel of the U.S. recovery, and progress putting the 13.9 million unemployed Americans back to work remains painfully slow.
The slight improvements in the labor market hinted at by Friday's report will likely do little to take the pressure off President Barack Obama, who faces a tough fight for re-election next year.
However, they may be enough to keep the Federal Reserve on the sidelines as it considers whether the economy could benefit from a further quantitative easing of monetary policy.
"The labor market data suggest that growth may be strengthening even as Europe may be slipping into recession," said John Ryding, chief economist at RDQ Economics in New York. "As impatient as the Fed may be, it will be difficult to round up a consensus for QE3 as long as the employment data are pointing to an improving economy."
The U.S. central bank on Wednesday lowered its growth forecasts, raised projections for unemployment, and said it was considering additional mortgage debt purchases. Fed Chairman Ben Bernanke said officials were eyeing Europe warily.
LACKLUSTER JOB GROWTH
Even though the economy is in its second year of recovery, only about a quarter of the more than 8 million jobs lost during the recession have been recovered.
The economy needs to expand at an annual rate of at least 2.5 percent over a sustained period and consistently add roughly 125,000 jobs a month to keep up with new people entering the workforce.
The Obama administration has struggled to come up with policies to generate sufficient employment amid stiff opposition from Republicans over more spending.
Bernanke took lawmakers to task on Wednesday. "It would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs," he said after a two-day Fed meeting.
There are signs of progress. A broad measure of unemployment, which includes people who want to work but have given up looking for jobs and those working only part time for economic reasons, fell last month after scaling a nine-month high in September.
The average duration of unemployment retreated from a record high of 40.5 weeks hit in September.
Last month, private employers added 104,000 workers, more than offsetting a drop in government payrolls of 24,000. Public employment has fallen nearly every month this year as state and local governments grapple with budget constraints.
In the private sector, job gains last month were almost across the board, though construction fell 10,000 after a surprise addition of 29,000 jobs in September.
Manufacturing payrolls rose 5,000 after a slight decline in September. In the service sector, retail employment added to the prior month's gains.
There were also gains in professional and business services, and temporary employment, which rose 15,000. Economists often look to temporary hiring as a harbinger of increased permanent employment.
Hiring in the healthcare and social assistance sector, which has been boosted by the swelling ranks of retirees, rose 16,300. However, the gain was less than the prior months.
The average workweek was steady at 34.3 hours and hourly earnings rose 5 cents.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)
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