Hurricanes have little effect on US job rate

The US economy suffered only a small drop in employment last month, in spite of the disruption on the Gulf coast, and revisions pointed to more robust job growth over the summer.

Employer payrolls fell by 35,000 in September, the Labor Department reported, much less than the consensus forecast of a 150,000 drop.

July and August's payrolls were revised upwards to an average of 244,000 per month from 206,000 based on the earlier estimate. Over the past 12 months the average was 194,000.

The employment report, one of the broadest measures of the strength of the economy, was the latest piece of evidence supporting the Federal Reserve's view that the expansion has not been derailed by Hurricane Katrina, bolstering its expectation that it will continue to raise interest rates.

A series of Federal Reserve regional presidents have said the economy is growing well, that there is little labour market slack and that the central bank needs to raise rates to keep inflation in check.

Surveys have pointed to a rise in inflation expectations following Katrina and the increase in energy prices.

The Labor Department estimated Katrina cut about 230,000 jobs from payrolls last month, suggesting strength in the rest of the country. The biggest falls were in the retail and leisure industries, where in both cases employment dropped by about 80,000.

"This means that the Fed can afford to focus on the inflationary implications of Katrina," said Alan Ruskin, director of research at 4Cast.

Building inflation pressures in the labour market is one source of concern for the Federal Reserve, although there was little sign of that in the payroll data. Hourly wages rose 0.2 per cent last month and 2.6 per cent in the 12 months to September. This continues to lag behind inflation. The consumer price index has risen 3.6 per cent in the year to August.