US companies added jobs in October at the fastest pace in eight months, a sign of modest healing in the labour market just days before a presidential election that could hinge on the economy. Other data on Thursday showed a sharp improvement in consumer confidence and a drop in new claims for jobless benefits, while there were mixed signals regarding the health of US manufacturing.
Private employers added 158,000 workers last month, the biggest gain since February, payrolls processor Automatic Data Processing said. "There is some evidence of labour market improvement," said David Sloan, an economist at 4Cast in New York. "It is not totally convincing yet but overall the message is positive." The data added to a string of better news on the health of the economy. Consumers have been spending more freely while home construction is picking up.
Still, Europe's debt crisis looms over the US recovery, as does the possibility of sharp tax hikes and government spending cuts that are due in January. Indeed, the ADP reading did not change the view that the US labour market still faces a long slog back to health. And it was unclear whether it augured a big increase in the government's more comprehensive jobs report due on Friday.
The ADP report was the first with a newly expanded survey of businesses. "We're just going to have to learn over the coming months how accurate this new survey is," said Nigel Gault, an economist at IHS Global Insight in Lexington, Massachusetts. Friday's jobs report is expected to show non-farm employers added just 125,000 jobs last month - not enough to prevent the jobless rate from rising a tenth of a point to 7.9 percent. The unemployment rate fell to a near four-year low in September, but remains well above pre-recession levels.
US consumer confidence rose last month to its highest level since February 2008, the Conference Board said, while Commerce Department data pointed to solid gains in home construction. "Consumers seem oblivious about possible tax increases," said Christopher Low, an economist at FTN Financial in New York. General Motors reported on Thursday that US sales rose 5 percent last month, and it estimated industry-wide US light vehicle sales in October at an annual rate of about 14.4 million, down from the 14.9 million in September.
In the factory sector, Europe's debt crisis and uncertainty over the direction of US fiscal policy appear to be biting more. One measure of US manufacturing in October from financial information firm Markit showed the slowest pace of growth in more than three years, suggesting the sector is dragging on economic growth even though it is still expanding.
Another report from the Institute for Supply Management was more upbeat, showing the pace of growth in the factory sector picked up modestly as new orders improved, though a measure of employment moved lower. "Manufacturing in the US is recovering but the pace is not enough to provide improvement to the job market," Joseph Trevisani, a strategist at World-wide Markets in Woodcliff Lake, New Jersey.
In a sign that businesses may not be poised to ramp up hiring significantly, growth in US nonfarm productivity held steady at a 1.9 percent annual rate in the third quarter, data from the Labour Department showed. The report also showed unit labour costs, a measure of the labour costs for producing any given measure of output, fell 0.1 percent as growth in hourly pay braked sharply. It was the first decline since the fourth quarter of 2011.
While the outlook for job creation has been muted, there have been some signs employers are backing off on layoffs. Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 363,000 last week, the Labour Department said. Still, the number of planned layoffs by US firms jumped 41.1 percent in October to the highest level in five months, according to consultants Challenger, Gray & Christmas, Inc. That increase included a round of layoffs planned by US firms in Europe.
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