US jobless rate could tick higher: analysts
The US unemployment rate could tick up slightly but the numbers will likely show an economy still generating new positions at a modest rate when October’s jobs report is published later on Friday.
In the last marker before the November 6 election of President Barack Obama’s record in battling high unemployment, economists on average predict the Labor Department data will show the rate rising to 7.9 per cent.
That would come mainly out of an adjustment of the figures after September’s unexpectedly sharp 0.3 percentage point fall to 7.8 per cent.
That figure that was not entirely justified by the low number of net jobs generated that month, 114,000, or the 12.1 million people counted as officially unemployed.
But anything other than an improvement of the jobless rate in Friday’s numbers could harm Obama’s re-election effort, as he runs neck-and-neck in national polls with Republican challenger Mitt Romney.
Analysts estimate the economy will have added 130,000 net jobs in October, still less than the 2011 monthly average of 153,000 and the equivalent number for the first nine months of this year.
While better than the natural growth of the labour supply, it underscores the feebleness of economic growth in recent months.
Governments have been cutting payrolls and businesses are holding back on hiring amid worries about a slowing global economy, the euro zone crisis and official US spending cutbacks.
Preview data -- the weekly new claims for unemployment insurance and the ADP payrolls survey released on Thursday -- supported the forecasts.
Unemployment claims, an indicator of the pace of layoffs, have been moving lower this year at a glacial pace, and at 363,000 last week were about 10 percent lower than at the beginning of the year.
The ADP survey of private sector hiring last month came in at 158,000. But because the survey was revamped in recent weeks, analysts were wary of adopting that number for their forecast for the Labor Department data.
Jason Schenker of Prestige Economics predicted a 7.9 per cent jobless rate and 145,000 new jobs.
“This report is likely to support the expectation of a modestly improving US labor market,” he added.
Even so, the numbers remain a challenge for Obama: in September, 18.8 million people remained either officially jobless or having dropped out of the labour market.
Though far down from the peak in 2010, that number compares badly to the 17.7 million figure when Obama became president in January 2009.
Neal Gilbert, a forex analyst at GFT, said Friday’s report “will be one of the most watched economic releases in recent history,” weighed by voters “to decide if President Barack Obama deserves another four years to try and turn our economic malaise in to a full-fledged recovery.”
“If Obama can continue the decline in the unemployment rate, it would greatly increase his chances of being re-elected.
However, if the unemployment number jumps back above eight per cent, Romney may have the upper hand,” he said.
Both sides are expected to spin the numbers in their own way -- Obama noting that the jobless rate was 10 per cent two years ago, while Romney highlighting the still-high number of jobless.
“With the election only a few days away, and so many undecided voters, a positive employment report could be good for an Obama re-election, which could be bearish for markets” that prefer Romney, said Schenker.