By  on November 5, 2007

WASHINGTON — U.S. department and specialty stores cut a combined 6,500 jobs in October, but merchants got some positive economic news — a surprise uptick in overall job growth.

U.S. textile and apparel manufacturers continued their long-term slide, trimming 4,900 seasonally adjusted jobs from payrolls as factories felt the impact of foreign competition, the Labor Department reported Friday.

Employers added 166,000 jobs to payrolls in October, about double economists' expectations. The gain was driven by increases in education, health care and government, as well as the leisure and hospitality sectors. Those increases offset job losses in manufacturing, retail and construction. The unemployment rate was unchanged from September at 4.7 percent.

Still, economists were cautious because of the worst housing slump in 16 years, the subprime mortgage crisis, tight credit and higher energy costs.

"Does this [jobs] report mean that recessionary concerns can be set aside? Absolutely not," Nigel Gault, U.S. economist for Global Insight, wrote in a report. "The credit crisis continues to rage and nobody can be sure how much further housing has to decline — and how hard the housing decline and rising oil prices will hit consumer spending."

Retailers preparing for the holidays are anxiously watching consumer spending.

"Firms don't normally add temporary workers if they think that the economy is about to dive," Gault said.

Apparel and accessories stores, which had posted consecutive monthly jobs gains, downsized in October, cutting 1,000 seasonally adjusted jobs for a total of 1.46 million. Department stores continued their slump, trimming 5,500 jobs from payrolls for a total of 1.54 million.

Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, said the stronger-than-expected jobs report "tells you that the economy is not as weak right now."

But he warned that it is no indication the economy will not weaken further.

"The danger is the next two quarters because consumption will be slow and if corporate ceos decide to pull back from investment plans, that would be a problem," Dhawan said. "No investment today means no jobs tomorrow."

He expects a slowdown in consumption and consumer spending because housing prices are falling."Home prices are coming down and that will take away some spending and purchasing power that people have had in the last few years through refinancing loans," Dhawan said. "That is not good for the retailers."

The big issue for consumers, especially those in large metro areas, is "how well they feel from their home prices," he said.

"The employment numbers say that the holidays will not be as bad for retailers, but the economy is definitely moderating and affecting consumers," Dhawan observed. "The other dangers for retailers during the Christmas season is how high gas prices go."

The manufacturing sector deepened its slump in October and the apparel and textile industry continued to slash jobs, battling foreign competition and low-cost imports. Textile mills cut a seasonally adjusted 2,200 jobs last month compared with September to a total of 166,600. Textile product mills employment fell by 800 jobs to 151,400. U.S. apparel factories cut a seasonally adjusted 1,900 jobs to 210,600.

"Again in October, all net new jobs are in industries with little or no exposure to foreign imports, outsourcing or exporting," said Charles McMillion, president and chief economist at MBG Information Services, in a report.

McMillion said the manufacturing sector has suffered a decline of 7.6 percent in total hours worked over the past 71 months.

"This is, again, by far the worst employment loss on record, with the average comparable period seeing 10.4 percent growth in the total hours worked in manufacturing," he added.

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