Job growth strong, but not everywhere

By Joanne Morrison

WASHINGTON (Reuters) - Job growth was stronger than expected last month but weakness persisted in the factory sector, while retail employment -- just ahead of the holiday shopping season -- recorded the biggest drop in six months.

The U.S. Labor Department on Friday reported that the economy added 166,000 new jobs outside of the farming sector and that the unemployment rate held steady at 4.7 percent

While the rise in employment was the largest since May, analysts noted some signs of job-market weakness have emerged.

"A one-month jump in payrolls doesn't end the gradual slowdown in labor market conditions," said economist Harm Bandholz at UniCredit.

Over the past six months, 90 percent of the employment gains have been in three sectors: education and health, leisure and hospitality, and government.

"These sectors' strength has cushioned the weakness in the more cyclical sectors like manufacturing, retail sales, and of course, construction," Bandholz said.

During October, job growth was concentrated in restaurants, health care and temporary employment. "The three sectors together accounted for 70.2 percent of the job gains reported for the private sector," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

The manufacturing sector lost 21,000 jobs, despite a big surge in exports over the past several months. Analysts attributed the decline to continued troubles at U.S. automakers, and details of the report showed that nearly 14,000 jobs were cut in the motor vehicle and transportation equipment areas.

Construction jobs were down by 5,000, as housing-related weakness was largely offset by a big rise in non-residential building.

RETAIL JOBS LOST

Employment in the retail sector fell by 21,500 workers, only weeks before the holiday shopping season kicks off. It was the biggest monthly loss of jobs in this area since April.

"The bottom line is that this is a strong report, but the labor market is not exactly firing on all cylinders," said Stephen Stanley, chief economist at Greenwich Capital.

On a positive note, the real estate sector, even in the midst of a housing downturn, added a net 2,100 jobs last month. The financial sector was also able to shrug off much of the housing and credit market troubles, adding 2,000 jobs.