October jobless report is better than was expected

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The expectations for October's unemployment report were bleak, with many economists expecting to see negative effects from the 16-day government shutdown.

But the U.S. Bureau of Labor Statistics reported Friday that the nation added 204,000 jobs last month, double what the general consensus of economists expected. The U.S. unemployment rate rose to 7.3 percent, up from 7.2 percent in September.

The stock market reacted favorably to the news; the Dow Jones Industrial Average closed Friday at 15,671, adding 167.80 points or 1.08 percent. The Nasdaq rose 1.60 percent to 3,919, and the S&P 500 was up 1.34 percent to 1,770.

While the better-than-expected jobs numbers appear to be good economic news, Heidi Shierholz, economist for the Washington, D.C., research organization Economic Policy Institute, termed the results "weird."

To understand the weirdness, it helps to break down what data drives the unemployment report. Two different surveys are used to create a complete picture of the nation's jobs situation: an establishment piece, based on a survey of businesses about jobs, payroll and where jobs are located; and a household survey to understand what workers are seeing.

"And generally when these reports come out, since they're measuring similar things, usually they tell roughly the same story," Ms. Shierholz said. "But sometimes they don't. And this is one of those months, with the two surveys telling different things."

The establishment data show improvement in several sectors: Manufacturing added 19,000 jobs while retail added 44,000. Employment in the food service sector rose by 29,000 jobs and health care added 15,000 jobs, the Bureau of Labor Statistics found.

Meanwhile, the household survey showed the economy lost 735,000 jobs.

Even if the government shutdown didn't traumatize the economy, it definitely influenced the jobless report.

The report's publication was delayed by a week in order to allow time to collect enough data; the response rate for the household survey was within normal range, and the establishment survey was above average, according to the release.

But with 800,000 government workers furloughed by the shutdown, some were classified as "unemployed on temporary layoff" and others as "employed but absent from work." The former is more accurate, according to the Bureau of Labor Statistics analysis.

Doug Handler, an economist with IHS Global Insight, wrote in his analysis that the business data showed the shutdown had "little economic impact in the private sector as had been widely feared," while the data from the household survey "does reflect the impact" of the shutdown.

"We expect these results to be reversed in the November data," Mr. Handler wrote.

Ms. Shierholz said it's typical to focus on the establishment survey data because it typically doesn't have large swings from month-to-month. The October results showing an additional 204,000 jobs is a positive thing, she said, but "the fact that the household data is so weak adds a twinge of 'wait and see' to the report." She suspects that the economy added jobs, just not as many as the initial data indicate. The monthly numbers are often adjusted later.

Another item of note -- or second layer of weirdness -- from Friday's report, Ms. Shierholz said, was the sharp uptick in retail jobs in October. Usually retail hiring is seasonally adjusted, so that companies adding workers for the holiday shopping season are factored into the equation.

"This happened last year. We saw a big boost in retail hiring in October and November," she said. "Hiring for the holidays may be happening earlier than it used to, which could be why retail is unusually strong this year."

Economists differed on how October's report might influence the Federal Reserve, the nation's central bank that has been working to stimulate the economy as it continues recovering. Some said the new data probably isn't sufficient to convince the Fed that it can slow its $85-billion-a-month bond-buying program when it meets next month.

"The one month of job growth is not enough to allow them to pull the trigger," said Patrick O'Keefe, director of economic research at New York City-based CohnReznick.

Paul Ashworth, chief U.S. economist at London-based Capital Economics, disagreed, writing in a research note: "In our opinion, the data would justify the Fed reducing the pace of its asset purchases in December."

Ms Shierholz said the economic trend over the past year has been positive, but that full recovery is, and will continue to be, slow.

"Over the past year, the economy added 194,000 jobs per month, on average," she said. "That puts us on a trajectory to a recovery, but at that pace, we will not get back to pre-recession employment rate for about five years."

Kim Lyons: klyons@post-gazette.com or 412-263-1241. The Associated Press contributed.

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