Cannon Trading Futures Blog: Daily Support and Resistance Levels

       =DJ UPDATE: Jobless Rate Tumble May Stoke Fed Fears(DJ)

 
   By Brian Blackstone
   Of DOW JONES NEWSWIRES
 
  WASHINGTON (Dow Jones)--U.S. payrolls posted moderate growth last
month but prior months were revised sharply higher, pulling the
unemployment rate down to a five-and-a-half year low and
suggesting that labor market conditions remain very favorable for
U.S. workers.
  The figures are likely to offset fears of a sharp U.S. slowdown
and may pose a concern to Federal Reserve officials who have
warned that tight labor markets pose an inflation risk. That will
take expectations for a rate cut off the table in the short term,
analysts said, and could even spur fears of higher rates in coming
months.
  Non-farm payrolls increased 92,000 in October after growing a
revised 148,000 in September and 230,000 in August, the Labor
Department said Friday. The gain was due entirely to services,
which offset lower payrolls in the good sector.
  Previous reports had shown job growth of just 51,000 in September
and 188,000 in August.
  The October unemployment rate fell 0.2 percentage point to 4.4%,
its lowest level since May 2001, when it was 4.3%.
  Average hourly earnings increased $0.06, or 0.4%, to $16.91. That
was up 3.9% from a year earlier.
  Though the October job gain was below Wall Street expectations of
a 125,000 increase, the prior-month revisions signal that the
report was much better than expected. And the unemployment rate
was well below estimates for an unchanged 4.6% level. Wages came
in slightly above expectations for a 0.3% rise.
  The data suggest "the labor market is very tight, that wages
should begin to re-accelerate soon and that the consumer is likely
to keep spending," noted Drew Matus of Lehman Brothers, who expects
one more rate hike from the Fed to quell inflation.
  Previous economic reports including a weaker-than-expected
Institute for Supply Management October index and tepid retailer
sales reports for October had suggested the fourth quarter started
on a soft tone and had spurred some hopes that the Fed may lower
rates in early 2007. The economy expanded just 1.6% in the third
quarter.
  The Fed has held the federal funds rate at 5.25% its past three
meetings. Yet it has also maintained a bias toward higher rates
should inflation persist and warned that price pressures could be
sustained in part by high "resource utilization," a reference to
the tight job market.
  In a speech Thursday, Fed Governor Susan Bies said that while
inflation should subside in coming months, risks "seem tilted
toward the upside," and that "one upside risk ... comes from the
labor market."
  The jobs report suggests the economy "retains substantial
underlying strength," said Steven Wood, head of Insight Economics,
in a research note.
  "If the economy continues to grow this quickly, the (Fed) will not
be able to ease any time soon and may actually need to tighten
further," he added.
  The Labor Department said hiring last month in goods-producing
industries fell by 60,000. Within this group, manufacturing firms
cut 39,000 jobs, while construction firms shed 26,000 jobs after
adding 5,000 the month before.
  Service-sector employment swelled by 152,000. Retail fell by
3,500, the sixth decline in seven months for that sector. Business
and professional services companies' payrolls rose 43,000. Education
and health services added 28,000 jobs.
  The average work week was up 0.1 hour at 33.9 hours.
  -By Brian Blackstone; Dow Jones Newswires; 202-828-3397;
brian.blackstone@dowjones.com
 
  (END) Dow Jones Newswires
  November 03, 2006 09:39 ET (14:39 GMT)
  Copyright (c) 2006 Dow Jones & Company, Inc. - - 09 39 AM EST
11-03-06

Keywords:  CURRENCY ENERGY FINANCIAL ECONOMY GENERAL
08:39:41   11/03/06