US economy adds surprise 204,000 jobs in Oct

WASHINGTON, United States – The US economy added a surprise 204,000 jobs in October despite uncertainty over the government shutdown that analysts feared would discourage businesses from hiring, the Labor Department reported Friday (Saturday, November 9 in Manila).

The figure was more than double what was expected, and coupled with revisions that added 60,000 net new jobs to the previous two months’ numbers, painted a picture of an economy healthier than many believed.

Nevertheless, the unemployment rate ticked up slightly to 7.3% as expected, compared with 7.9% a year ago.

And the participation rate in the jobs market fell to 62.8%, the lowest level since March 1978, as the number of people who have left the jobs market entirely surged by more than 900,000.

The jobs creation data was nevertheless strong enough to spark a fresh burst of confidence among economists, who suggested it could be enough to provoke the Federal Reserve into cutting back its stimulus as early as December.

The Fed has focused its policy decisions on the pace of hiring and the fall in the jobless rate – though it has also shown concern over the drop in labor force participation.

The data came a day after the government’s initial estimate of economic growth in the third quarter came in at an annual rate of 2.8%, much stronger than anticipated.

“The Fed now has one more payroll report before its December meeting; clearly, another report like this one will greatly increase the odds of tapering at that meeting,” said Ian Shepherdson of Pantheon Macroeconomics.

“Strong payroll gains put December tapering on the agenda again,” said Harm Bandholz of UniCredit.

The additional jobs all came from the private sector, as government authorities cut a net 8,000 positions.

The strongest gains were in the leisure and hospitality sector, which added 53,000 jobs; retail trade, which added more than 44,000 positions; and professional and business services, another 44,000.

Construction and manufacturing together added 30,000 jobs.

The White House was cautious, cheering the data while warning that the economy was still scarred by the partial federal government shutdown, which saw hundreds of thousands of workers furloughed from work over October 1-16.

“The upward revisions to job growth in August and September, combined with solid third-quarter GDP growth reported yesterday, suggest that the economy was gaining traction in the months leading up to the government shutdown,” Jason Furman, chairman of the White House’s Council of Economic Advisers, said in a statement.

“There should be no debate that the shutdown and debt-limit brinksmanship inflicted unnecessary damage on the economy in October.”

The Alliance for American Manufacturing, frequently a critic of the administration, was positive about the October numbers.

“Now we have a jobs report that we can cheer about, despite all the chaos in Washington last month. Manufacturing jobs grew at a healthy clip, and it’s about time,” said Scott Paul, AAM president.

The picture of strong jobs creation and yet a deteriorating employment situation stems from data that comes from two separate surveys: job creation is based on a survey of establishments, while unemployment is based on a household survey where the data is frequently more inconsistent from month to month.

The government layoffs, though temporary and paid, affected some of the data in the household survey, including the number of unemployed.

Nevertheless, the huge rise in the number of people who have dropped out of the job market, and the fall in the participation rate, were not explained by the shutdown.

Analysts could not clearly explain the diverging pictures, but said the November household data was likely to improve the picture from October’s report.

The bond market took the report as an indicator the Fed would soon begin cutting back its monetary stimulus, with the 10-year Treasury yield rising 0.14 percentage point to 2.76%.

Stock markets were positive. The S&P 500 index was up 0.6% to 1,757.97 in late-morning trade. – Rappler.com