Transcripts

The Jobless Rate Drops But Concerns Still Rise

SUSIE GHARIB: The nation's unemployment rate is at a 5 1/2 year low tonight, 4.4 percent. The Labor Department today reported strong job growth over the past three months. Experts say that suggests that the economy may not be slowing as much as previously thought and the Federal Reserve will not cut interest rates anytime soon. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fewer jobs were created in October than most forecasters expected, but there were large upward revisions to the employment number for August and September, a big surprise to many. In all, 92,000 jobs were created in October with teachers, restaurant and healthcare workers leading the way. The unemployment rate fell to 4.4 percent. The immediate reaction in the bond market was sharp with a significant decline in prices. Traders fearing competition for workers will put pressure on wages. Average earnings rose a bigger than expected $0.06 an hour in October. That could prompt the Federal Reserve to raise interest rates to further slow the economy and control inflation.

IAN MORRIS, CHIEF U.S. ECONOMIST, HSBC: The tight labor market is a concern for the Fed. Right now hourly earnings are running at around four percent on a year over year basis. So it's fairly benign. It's not out of control. But the Fed will be worried that it might creep higher given how tight the labor market is.

GURVEY: The Fed has kept interest rates steady at 5 1/4 percent at each of its last three meetings. It is still expected to do the same at its final meeting for the year on December 12. But predictions it would begin cutting rates early in 2007 are being dropped in reaction to today's report. There is also some grumbling on Wall Street over the recent string of revisions to the employment data with some wondering if there is a problem with the surveys, which may not be keeping up with the changing economy.

NEAL SOSS, CHIEF ECONOMIST, CREDIT SUISSE: We've been seeing repeatedly some upward revisions which suggests something about the structural change in the economy. It's just hard to measure the economy because it is a different economy from what we used to know many years ago.

GURVEY: With the mid-term election just days away, the employment report is having an impact and most agree it will be positive for incumbents, if economic issues drive voters' decisions on Tuesday. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.