Despite worries the 16-day government shutdown would weigh on job growth, the October jobs report was surprisingly strong.
That's what the government is reporting, anyway...
According to the Labor Department numbers released today (Friday), employers increased headcount by 204,000 in October, handily beating the 120,000 many economists expected. The government report also showed revisions to late summer numbers, revealing an extra 60,000 jobs total were created in August and September.
Although the October report included the robust 204,000 number, it was full of uninspiring data:
- The labor force participation rate continues to drop. It slipped to 62.8% from 63.2%, last month, the lowest read since March 1978. An astonishing 932,000 - nearly 1 million Americans - dropped out of the labor force last month, bringing the rate to a fresh 35-year low. It marks the third-highest monthly increase in individuals leaving the labor force in U.S. history. "At this pace, the people out of the labor force will surpass the working Americans in about 4 years," writes ZeroHedge.
- October job gains were highest among the lowest-paying sectors. These are actually are a "net drag" on the economy, according to The Wall Street Journal, due to the amount of assisted government benefits these workers receive. A University of California, Berkley, and University of Illinois study found front-line workers at fast-food restaurants, and their families, received at least $7 billon annually in public benefits to supplement their wages.
- The federal government continued to trim workers, cutting 12,000 (one-third of which were at the U.S. Postal Service). That brings the year-to-date total to 94,000. Excluding the postal service, the October report showed federal jobs at the lowest level since 2009.
- The number of long-term unemployed held steady at 4.1 million, accounting for 36.1% of the unemployed.
- The number of temporary workers rose by nearly 500,000. The mushrooming number likely includes non-essential government employees and government contractors affected by the government shutdown. The number underscores the distorted picture the BLS report paints of the labor market, in part due to the thousands of federal workers furloughed during the payroll period upon which the jobs data is based.
- The unemployment rate rose to 7.3% from 7.2% in September. The official unemployment rate counts only those workers who are actively seeking work. If the same percentage of adults were in the workforce today as when U.S. President Barack Obama took office, the unemployment rate would be upwards of 10.8%, the Washington Post reports.
October's seemingly swift job growth, coupled with the sizable upward revisions for the previous two months, fueled speculation that the U.S. Federal Reserve will soon take action to scale back its $85 billion a month asset purchase program. A taper was expected in September, but lackluster economic data prompted the Fed to pause.
"The Fed now has one more payroll report before its December meeting," Ian Shepherdson, chief economist at Pantheon Macroeconomic, wrote in a note to clients Friday. "Clearly, another report like this one will greatly increase the odds of tapering at that meeting. Our base case remains that it won't happen then, but the odds have sustainably improved already with the release of these numbers."
Sharing that sentiment is Robert Murphy, an economics professor at Boston College. Murphy told ABC News the Fed is likely to hold off its tapering of bond purchasing until next year due to the fact the first "clean" employment report won't be presented until early January, with December's data.
"November's report, due out in early December, will contain some 'bounce back' from the shutdown that will continue to cloud the Fed's interpretation of the state of the labor market, putting the Fed on hold at its next meeting in mid-December," Murphy said.
And with Yellen on her way in, it looks like more of the same for months to come... take a look...
- The Wall Street Journal:
Public Cost of Fast-Food Industry's Low Pay Remains Unclear
- ABC News:
Jobs Report Shows Unemployment Rate Ticked Up to 7.3%; 204,000 Jobs Added
- The New York Times:
Hiring Brisk in Jobs Data Skewed by U.S. Shutdown
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