Shutdown drove up unemployment despite strong Oct. job growth

The federal shutdown last month caused a small rise in the unemployment rate to 7.3 percent but it was a surprisingly good month to find jobs in the private sector, the Labor Department reported Friday morning.

Businesses created more than 204,000 jobs in areas from retail and manufacturing to offices, hotels and restaurants. The department also detected 60,000 more jobs that were created in September and August in revisions to its previous employment reports — a sign that the job market has been healthier than previously assumed.

The burst of job creation last month — nearly twice as much as what economists had expected — more than offset an estimated 12,000 in job losses in the federal government, which brought the total number of federal job eliminations due to budget cuts to 94,000 in the last year.

The number of workers on temporary layoff jumped by 448,000 in October, likely reflecting the furlough of federal employees during the 16-day shutdown that started Oct. 1. But the department said there were no other discernible impacts from the shutdown on its estimates of employment, hours worked and earnings during the month.

“This is an unequivocally strong employment report,” said Harm Bandholz, economist with Unicredit Markets. The figures are causing “well-justified excitement” in global financial markets as they portray a healthy job market with enough momentum to satisfy governors at the Federal Reserve who have been looking for an acceleration of job growth, he said.

“This defies expectations that the government shutdown hit hiring,” said Chris Williamson, chief economist at Markit, adding that markets have been caught off guard by the unexpectedly robust report.

“The data will add to the view that the Fed is gearing towards a tapering of its asset purchases” of $85 billion a month, he said, a prospect that could set off another downturn in stock and bond markets.

“But policymakers will most likely wait for clearer signs that the economy is capable of growing at a faster rate” as suggested by the report, he said.

Some economists were suspicious about the accuracy of the numbers since the shutdown caused a one-week delay in the collection and publishing of the report, as department economists who usually compile the figures were among those furloughed. Changes in the department’s usual data collection procedures can have distorting effects, and a clear picture of the economy may not emerge for several more months, they said.

“The household survey is weird. It says unemployment only rose 0.1 percent to 7.3 percent,” even though 735,000 more people said they lost jobs, said Justin Wolfers, economics professor at the University of Michigan. He advised his Twitter followers to ignore the household survey which contains the unemployment figures and focus on the survey of businesses, which contains the figures on new payroll jobs.