WASHINGTON – The October employment report the government will release Friday will likely solidify the picture of the U.S. job market that’s emerged this year: Companies are hiring steadily but cautiously. And unemployment remains high.
Economists forecast that employers added 121,000 jobs in October, according to FactSet. That would be up slightly from September but below this year’s average monthly gain of 146,000. And it’s too weak a hiring pace to quickly reduce unemployment.
Analysts think the unemployment rate rose to 7.9 per cent from 7.8 per cent in September.
Friday’s report is the last broad snapshot of the economy before Tuesday’s presidential election. Any increase in the rate would mean that President Barack Obama would face voters with the highest unemployment rate of any incumbent since Franklin Roosevelt.
In 1976, President Gerald Ford lost to Jimmy Carter when unemployment was 7.8 per cent.
A weak job report would also provide ammunition for GOP challenger Mitt Romney, who has charged that Obama’s policies have held back the economic recovery.
On the other hand, Obama might benefit from recent declines in unemployment. The 7.8 per cent rate in September was the lowest since Obama entered office in January 2009. The rate dropped by a half-point in just August and September.
Yet it’s unclear how much political effect any economic report will have. By this point, all but a few voters have made up their minds, particularly about the economy.
“People have given this a lot of thought,” said Andrew Kohut, president of the Pew Research Center. “One report, unless it is a real shocker, is unlikely to affect their view of whether Obama has done a good job with the economy or if Romney would do a better job.”
The recent drop in unemployment has heartened consumers, who are more confident and spending more. That’s providing much-needed support to the still-weak economy.
The Conference Board said Thursday that its index of consumer confidence surged to 72.2 in October, its highest level since February 2008, two months into the Great Recession.
The index is still below the level of 90 that’s consistent with a healthy economy. But it’s far above its all-time low of 25.3 in February 2009, in the midst of the financial crisis.
Americans are buying more big-ticket items, like cars and appliances. Auto companies reported steady sales gains last month despite losing three days of business to the storm in heavily populated areas of the Northeast.
Yet businesses remain nervous about the economy’s future course. Many are concerned that Congress will fail to reach a budget deal before January. If lawmakers can’t strike an agreement, sharp tax increases and spending cuts will take effect next year and possibly trigger another recession.
American companies are also nervous about the economic outlook overseas. Europe’s financial crisis has pushed much of that region into recession and cut into U.S. exports and corporate profits.
But steady consumer spending is supporting gains in U.S. factory production. The Institute for Supply Management, a private trade group, said manufacturing activity expanded for the second straight month in October.
New orders and production rose, the ISM’s survey found. The increase came mainly in consumer-oriented industries such as furniture, food and beverages, and computers. Demand for machinery, chemical products, steel and other metals fell.
In a rare dose of healthy news for the global economy, China’s manufacturing improved in October, two business surveys showed Thursday. The world’s second-largest economy may be recovering from its deepest slump since the 2008 global crisis.
Analysts expect China’s growth to strengthen this quarter. But they caution that the rebound will be too weak to drive a global recovery without improvement in the United States and Europe.