Hurricanes help to create jobs in US

George Bush received the best possible boost to the start of his second term yesterday when US payrolls rose at the fastest rate for seven months, well above the market's expectations.

The US department of labour said that 337,000 jobs had been created in October.

Gary Thayer, an economist at A G Edwards & Sons Inc, in St Louis, Missouri, said: "It looks like the job situation is improving and this will support consumer spending going into the holidays and offset the drag caused by oil prices this year."

However, economists said the figures increased the risk that the Federal Reserve would raise interest rates again.

The Fed meets next week and is expected to raise interest rates by 0.25% to 2%. Before the jobs data most analysts were expecting the Fed to leave rates on hold at its subsequent meeting. Now they believe it is possible the rate rises could continue.

Robert MacIntosh, chief economist with Eaton Vance Management in Boston, said: "[The strong payroll data] ... should empower the Fed to clearly do something next week and probably raises the odds that they will do something in December." The increase in the number of jobs in October was almost twice the consensus forecast of 169,000 predicted by economists. The labour department also revised up its estimates of the number of jobs created in the two previous months, to 139,000 in September from 96,000 and to 198,000 in August from 128,000.

Part of the pick-up in jobs was down to the worst hurricane seasons for many years. About 71,000 new construction jobs had been added - the most since March 2000.

Kathleen Utgoff, commissioner of the Bureau of Labor Statistics, said this "reflected rebuilding and clean-up activity in the south-east following the four hurricanes that struck the US in August and September".

Another sign that job creation had been strong was an increase in average hourly earnings by 0.3% compared to last month and by 2.6% compared to last year.

The unemployment rate increased to 5.5% from 5.4% in September.

The news did little to buoy up the falling dollar which set a record low against the euro of $1.295 as markets fretted about the huge US fiscal and trade deficits. Gold also hit a fresh, 16-year high of $435 an ounce.