* Private employers hire 130,000 workers in October
* Consumer prices rise 0.2 percent in September
* Core CPI up 0.1 percent, annual rate slows to 1.7 percent
By Lucia Mutikani
WASHINGTON, Oct 30 U.S. private-sector employers
hired the fewest workers in six months in October while tepid
domestic demand kept inflation benign last month, suggesting the
economy was still in need of stimulus from the Federal Reserve.
The slowdown in private job growth was the latest signal
that the labor market has taken a step back in recent months and
the clearest indication yet that a 16-day federal government
shutdown weighed on economic activity.
Fed officials stuck to their monthly $85 billion bond-buying
pace at the end of a two-day meeting on Wednesday and said
fiscal policy was restraining economic growth.
"It (data) suggests accommodative policy might be necessary
for longer and more aggressive monetary policy might be needed
to break the lack of momentum in the economy," said Laura
Rosner, an economist at BNP Paribas in New York.
Employers in the private sector added 130,000 new jobs to
their payrolls this month, the ADP National Employment Report
showed on Wednesday. That was the lowest reading since April and
was below economists' expectations for a gain of 150,000 jobs.
It was the fourth straight month that private jobs growth
slowed, according to the ADP data. There was a marked slowdown
in hiring by small businesses, where payrolls increased 37,000
last month, well below the 68,000 new jobs created in September.
Mid-sized firms also hired fewer workers than in September.
"The government shutdown and debt limit brinkmanship hurt
the already softening job market in October," said Mark Zandi,
chief economist at Moody's Analytics in West Chester,
Moody's Analytics is a joint developer of the ADP report.
While the ADP data does not have a good track record of
predicting the government's more comprehensive non-farm payrolls
count, it suggested that report will find weakness as well.
The government will publish its closely watched payrolls
report on Nov. 8. Payrolls gained 148,000 in September, with the
unemployment rate hitting a near five-year low of 7.2 percent.
But if average monthly jobs growth continues at less than
150,000, where it has been over the last three months, that
would make it difficult for the jobless rate to fall further.
In a separate report, the Labor Department said its Consumer
Price Index increased 0.2 percent last month as a rebound in
energy prices offset an unchanged reading in food costs. The CPI
had edged up 0.1 percent in August.
In the 12 months through September, the CPI increased 1.2
percent, the smallest gain since April.
FED TO STAY THE COURSE FOR A WHILE
The weak labor market picture and benign inflation
environment should allow the Fed to stay the course on its
monthly bond purchases for a while as it tries to stimulate the
economy through low interest rates.
The Fed targets 2 percent inflation, although it tracks a
gauge that tends to run a bit below the CPI.
"We do not expect tapering (of bond purchases) to begin
before January at the earliest," said Michael Hanson, an
economist at Bank of America Merrill Lynch in New York.
But traders read the Fed's statement as being a bit hawkish.
U.S. stocks fell in choppy trade, while the dollar advanced
against a basket of currencies. Prices for U.S. Treasury debt
surrendered early gains and were last trading lower.
There was no sign of underlying inflation pressures last
month. The so-called core CPI - which strips out the volatile
energy and food components - nudged up 0.1 percent. It rose by
the same margin in August.
Last month's rise took the increase in the core index over
the past 12 months to 1.7 percent after advancing 1.8 percent in
This measure touched a two-year low of 1.6 percent in June
and the slowdown last month could catch the attention of some
Fed officials who are concerned about inflation being too low.
Last month, inflation was lifted by a 0.8 percent rise in
energy prices, which accounted for about half of the rise in the
CPI. Energy prices had dropped 0.3 percent in August.
Food prices were flat in September, producing the weakest
reading since May.
Shelter and medical care costs accounted for most of the
increase in the core CPI last month. Owners' equivalent rent of
primary residence rose 0.2 percent after rising 0.3 percent in
August. It is the biggest single component in the CPI.
Medical care costs increased 0.3 percent, with hospital
services rising 0.7 percent. Medical care, which makes up more
than 9 percent of the core index, has been one of the key
contributors to the low inflation early in the year.
Apparel prices recorded their biggest drop since March.
"Inflation remains tame, although the recent trend toward
slowing still appears to have stopped, even with the dip in the
change from a year ago in core in September," said Jim
O'Sullivan, chief U.S. economist at High Frequency Economics, in
Valhalla, New York.