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U.S. Adds 171K Jobs In October: What It Means For Obama And Romney

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(Image credit: Getty Images via @daylife)

The U.S. economy added 171,000 jobs in October, according to the nonfarm payrolls report from the Bureau of Labor Statistics. That was well above the expected 125,000, and private sector payrolls were up 184,000. Unemployment was little changed, up a tenth of a point to 7.9%.

Job growth was widespread, with gains in every sector but government, and the previous two months were revised higher. September's figure was increased to 148,000, from 114,000, while August's jobs tally rose to 192,000 from 142,000.

The Labor Department said Hurricane Sandy had no discernible impact on its collection of employment data. The household-based survey was completed before the storm, while the establishment survey fell within normal ranges, even for the affected areas, the BLS said.

Friday's number marks the last reading on the U.S. labor market before Americans go to the polls Tuesday, and the Obama and Romney campaigns will be quick to weave the figure into their candidate's narrative.

Throughout the campaign the president has maintained that his administration has made progress since coming into office in January 2009, when the economy was still hemorrhaging hundreds of thousands of jobs per month. Mitt Romney has argued that Obama's policies have failed to reignite the American economy and are holding back stronger job growth.

October's jobs report is hardly a home run. Any job gain is clearly better than job losses, but for a long-term decline in the unemployment rate economists say job growth needs to be well above its current pace. Meanwhile, some of the figures underlying the report remain stagnant. The average workweek was essentially unchanged at 34.4 hours, while average hourly earnings dipped a penny to $23.58.

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Alan Krueger, chairman of the Council of Economic Advisors, delivered the Obama Administration's take on the jobs figure, writing that the trend is heading in the right direction and the president should get credit for digging out of a recession that began on his predecessor's watch.

"It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007," Krueger wrote in a White House blog post Friday. Obama himself touted October's eight-month high in job gains at a campaign stop in Ohio, but stressing "we've got more work to do."

Mitt Romney called the jobs report "a sad reminder that the economy is in a virtual standstill," in a statement issued by his campaign Friday. "The jobless rate is higher than it was when President Obama took office, and there are still 23 million Americans struggling for work," he said. "On Tuesday, America will make a choice between stagnation and prosperity.” At a campaign event in Wisconsin, Romney said Obama promised to lower the unemployment rate to 5.2% and has fallen nine million jobs short.

The difference of opinion is no surprise in the final days of a heated campaign, but outside of Washington several views tilted toward Obama's side.

Jim O'Sullivan, chief economist at High Frequency Economics, writes Friday that the payrolls statistics "are signaling fairly health job growth," with revisions to prior months shoring up the case for an economy that appears to be coming out of its summer malaise. "The gains in both payrolls and the household survey employment measure make a downtrend in the unemployment rate quite credible," O'Sullivan says.

Fannie Mae's chief economist Doug Duncan says the improving jobs data, along with a recent pickup in consumer sentiment, are encouraging for the housing market. "The overall fundamentals—a low interest rate environment, rising housing price expectations, and an improved pace of healing in the labor market—are setting the stage for a solid housing recovery," he reports.

Brad Sorensen, director of market and sector analysis at Charles Schwab, said jobs report was "relatively solid," but still well short of the monthly gain needed to bring the unemployment rate down more swiftly, which he estimates in the 300,000 range. After the summer's soft patch, the August-September-October labor figures indicate "some acceleration in growth" that will likely keep the U.S. "out of stall speed," he says.

Wall Street barely budged before Friday morning's report. Index futures were flat leading into the number, made a brief charge, then fell back to nearly break-even. Almost two hours after the open the Dow was off 0.3%, while the Nasdaq and S&P 500 lost 0.2% apiece. The dollar was stronger, while gold prices fell to below $1,700 an ounce.

Scott Brown, chief economist at Raymond James, offers two potential explanations for the market's drop. First, there could be an expectation that the jobs number bolsters Obama's re-eleciton chances, and traders are taking that as a negative for equities. Second, there may be some concern that a string of improving employment numbers could bring up the timetable for the Federal Reserve to dial back its monetary stimulus. Some Fed officials have discussed 7.2% as an unemployment tipping rate at which the central bank could take its foot off the gas, Brown says.

J.J. Kinahan, chief derivatives strategist at TD Ameritrade, predicted a fairly quiet trading environment Friday and into the start of next week.  "It's a tough election to stick your neck out on," Kinahan says.

While the presidential election gets the bulk of the headlines, the House and Senate elections are likely to have a greater impact on whether the fiscal cliff gets resolved. That story concerns traders, "and is even harder to call," Kinahan says, leading many to seek some short-term safety in bond funds that can deliver a minimal return as a parking space.

Among the stocks on the move Friday morning was Chevron, down 1.6% after earnings and revenue that were lighter than estimates a day after rival Exxon Mobil recorded a big boost in refining profits that helped boost its numbers.

Starbucks, which recorded a strong quarterly report after the bell Thursday, was up 10.5%. AIG fell 5.4%, after Chief Executive Robert Benmosche said losses from Hurricane Sandy will not be a problem for the insurer.

Verizon, which warned in an SEC filing Friday morning that Sandy may have a "significant" impact on fourth-quarter results, recouped a pre-market loss to gain 0.4%.

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