Distorted Jobs Report Shows Unemployment Rate Up to 7.3 Percent

Government workers protest the federal shutdown Monday, Sept. 30, 2013, in Chicago.

October’s jobs report is distorted because of the timing of the shutdown.

The government’s job report released Friday says the nation added 204,000 jobs in October and that the unemployment rate ticked upward, to 7.3 percent. Those numbers are marred, however, by the government shutdown, and it may be months before data not distorted by the 16-day October shutdown are available.

The 204,000 jobs the Labor Department counted come in well above consensus estimates, which stood at 120,000 according to Bloomberg, though those economists’ estimates ranged widely, from a loss of 300,000 to 168,000. The unemployment rate, meanwhile, is in line with expectations.

The report shows a boost of 53,000 workers in leisure and hospitality, an industry that includes restaurant and hotel workers, in addition to more than 44,000 new jobs in the retail sector. Professional and business services, a broad category that includes temporary workers, accountants, and consultants, added 44,000 workers. Meanwhile, wholesale trade lost 5,400 workers, and government lost 8,000 jobs – a figure that does not include furloughed workers.

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October’s jobs report is distorted because of the timing of the shutdown, which happened from Oct. 1 through 16. The survey that produces the payroll number asks employers how many workers they had for the pay period that includes the 12th of the month, and the household survey, which produces the unemployment rate, asks people whether they worked during the calendar week that includes the 12th of the month.

That means both surveys were affected, and to an uncertain degree. For example, government workers who were furloughed during the shutdown would have counted on the household survey as unemployed, even though they knew they would eventually go back to work. However, the Labor Department noted in its release that some of these workers were misclassified as “employed but absent from work.” Meanwhile, government contractors whose employees could not work during the shutdown also may have therefore reported fewer workers during that time.

The effects of the shutdown, meanwhile, showed up in the number of Americans reporting being on temporary layoff. That figure jumped by 448,000, from 1.1 million to 1.5 million.

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The upside surprise of 204,000 jobs may be a sign of an economy weathering the shutdown well, or it may be yet another end-of-year boost in hiring, says one economist, but it’s too hard to tell right now.

“It’s too soon to tell, particularly given some of the atypical influences on the October data, the shutdown and its ramifications, not only in the public sector but in the private sector,” says Patrick O’Keefe, director of economic research at accounting firm CohnReznick.

Still, recent job growth has not been strong enough to drive an economic recovery, says one economist. The Federal Reserve in particular is closely watching jobs numbers to determine when it should end its asset-purchasing stimulus program known as quantitative easing and raise interest rates from their near-zero levels.

“I think the big picture is that in order to make a difference for the Federal Reserve and frankly for everyone else, we need to have a string of very strong reports. And by very strong, I would say north of 180 [thousand], possibly 200, and I don’t think it’s happening right now,” says Adolfo Laurenti, deputy chief economist for Mesirow Financial, a Chicago-based investment firm.

Without those kind of numbers, he says, there will not be enough job growth “to create that momentum, that sense of progress both for confidence and for critical mass.”

Unfortunately, it may be months before there are again clean jobs data. November’s jobs numbers may show a bounce back from the shutdown, meaning December’s jobs report could be the next available clear look at the labor market.

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