Political Economist

Job growth slowed sharply last month, the Labor Department reported today, in a sign that high energy prices are hurting the economy and business executives have become worried that the damage might grow.

Still, wages in October rose at their fastest clip in more than two years, leaving open the possibility that the hiring slowdown will turn out to be temporary.

Employers added only 56,000 jobs in October, well below the 150,000 or so that are needed to keep pace with population growth. The Labor Department also said that 36,000 fewer jobs were added in August and September than previously estimated.

"Job growth has kind of stalled out," said Bill Cheney, chief economist of John Hancock Financial Services in Boston. "It's a puzzle," he added, noting that economic growth, retail sales and other indicators remained strong.

Hiring over the last three months has fallen to its lowest level since the summer of 2003, when the economy finally began to emerge from a three-and-a-half year hiring slump. Recent hurricanes have played a role, leaving many Gulf Coast residents out of work, but job creation was also weak across much of rest of the country last month, Kathleen P. Utgoff, commissioner of the Bureau of Labor Statistics, told Congress.

With interest rates rising, the hot housing market cooling and energy costs coming off a two-decade high, some executives and economists are concerned that consumer spending will slow in coming months. For now, though, most forecasters expect hiring to pick up before the end of the year.

As poor as the October hiring number was, the government's monthly employment report offered a number of other reasons for optimism.

The jobless rate fell slightly, to 5 percent from 5.1 percent. It is calculated from a survey of households, which economists consider less reliable than the much larger survey of businesses that produces the job-growth numbers.

But the household survey sometimes captures hiring by small companies before the business survey does, and in recent months it has offered a rosier picture of the economy. Last month, for instance, the number of workers holding part-time jobs because they could not find full-time work dropped to its lowest point since 2002.

The business survey, meanwhile, showed that the average wage for rank-and-file workers rose 8 cents last month, to $16.27 an hour. That is equal to an annualized increase of more than 6 percent.

"There is an increased level of business caution," Drew T. Matus, a senior economist at Lehman Brothers, said. "But these kind of wage gains don't make sense in light of the low level of hiring unless business just decided to pause for the month."

Still, wage growth has risen less than 3 percent in the last year, while inflation has been running close to 4 percent, effectively cutting many workers' pay.

The spike in inflation, caused largely by oil prices, seems to have soured many Americans on the economy, despite its continued growth. In a recent poll by the University of Michigan, 60 percent of people said that they expected the next five years to bring periods of widespread unemployment.

Not since 1992 have so many people given that answer. In the middle of last year, fewer than 40 percent of respondents did.

In October, car dealers, hotels, restaurants, and movie and music studios all cut jobs. Department stores added fewer jobs than they typically do during October; that shows up as a loss in the Labor Department report, because the government adjusts its numbers to account for normal seasonal variations.

Across the economy, in fact, employment rose by 702,000 jobs last month. But the government reported a seasonally adjusted gain of only 56,000 because most of the new jobs were part of the usual October jump in employment.

John E. Silvia, chief economist of Wachovia Corporation, said many of the sectors cutting jobs depended on consumers, who might eventually react to high gasoline and heating prices by cutting other spending, even if they have yet to do so. On Thursday, retailers reported surprisingly good sales numbers for October.

"It's hard to put this all together," Mr. Cheney of John Hancock said.

Job gains last month came from manufacturers, banks, hospitals, doctors' offices, residential contractors and computer-systems companies. The end of a strike by Boeing workers helped cause a jump in the number of workers at transportation-equipment factories, and the early rebuilding of the Gulf Coast probably pushed up construction employment.

Economists still expect the Federal Reserve to keep raising its benchmark short-term interest rate in coming months in an effort to tame inflation. Alan Greenspan, the outgoing Fed chairman, testified to Congress on Thursday that he viewed inflation as a bigger threat than weak economic growth.

The Fed has increased the benchmark federal funds rate, now at 4 percent, during each of its last 12 policy-setting meetings. It seems poised to do so again at the two remaining meetings before Mr. Greenspan's retirement early next year.

Investors are predicting that the Fed will increase the rate at one of the first two meetings chaired by Mr. Greenspan's successor, Ben S. Bernanke, but not at both, based on the price of a futures contract tied to Fed policy.

The widening of income inequality in recent years appeared to continue last month. Wage gains for workers at financial, information and professional-services companies - who tend to be highly paid - all received big raises in October. Employees at factories, warehouses, tourism companies, schools and health providers received smaller pay increases.

In his testimony this week, Mr. Greenspan said the country was going through "a very marked changed in the distribution of income."

He added: "We have clearly observed a major increase in the need for skilled workers to basically staff our ever increasingly complex technological capital stock."

The dropout rate in high schools and colleges is too high for the economy to be fully staffed with qualified workers, Mr. Greenspan said.