Transcripts

The Jobs Report Could Derail Another Interest Rate Cut

SUSIE GHARIB: Good news today for job seekers, American businesses stepped up their hiring in October. The Labor Department said 166,000 new jobs were created last month, the most since May. Meanwhile, the unemployment rate held steady for the second straight month at 4.7 percent. Scott Gurvey reports that robust data reduces the chances of an interest rate cut by the Federal Reserve.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The employment picture is not as clear as the top line number might suggest. The job gains reported by the payroll survey far exceeded consensus estimates. But according to the separate household survey, the number of people working actually fell. Economists generally consider the payroll survey more accurate, because it's larger and directly monitors payroll records. But the household survey, which generates the familiar unemployment rate, may now be picking up signs of weakness which have yet to directly affect payrolls. Josh Feinman of Deutsche Asset Management notes that the household survey's estimate of the number of people working has declined in three of the last four months.

JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MGMT: The unemployment rate held steady. But there's a clear trend that's been going on for some time now where labor force growth has been somewhat slower. Maybe the labor market not quite strong enough to draw in as many people as would otherwise be the case. And the employment measure in the household survey has shown a clear weakening.

GURVEY: The strength in the payroll survey is also in agreement with recent gross domestic product reports showing the economy growing at a healthy rate. Economists speculate it may be that the shrinking workforce reported by the household survey reflects recent declines in consumer confidence, leading some people to stop looking for work. As for the Federal Reserve's next move, economist John Ryding of Bear Stearns speaks for the majority in concluding today's report diminishes the probability of another rate cut at the Fed's next meeting in December.

JOHN RYDING, CHIEF US ECONOMIST, BEAR STEARNS: To the extent that that monetary policy is being driven strictly by the economic data, this raises a fairly high hurdle to a further rate cut in December because the Fed has said that the inflation risks and the growth risks are about balanced and this is a report on the stronger side of growth, while at the same time we continue to see inflation risks in the oil market and in the currency market.

GURVEY: The Fed, of course, has stated it is considering the health of the credit markets in addition to the economic data. So developments on that front could easily change current expectations. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.