The federal government shutdown may have distorted the US employment report for October — but not the US economy.
Blowing away expectations, the Labor Department reported a surprisingly large 204,000 gain in October non-farm payrolls vs. a 125,000 consensus. Add in a combined a 60,000 upward revision to job gains in August and September and the three-month average is 202,000 vs. 154,000 in the August-October period in 2012. Capital Economics:
Apparently, the near three-week Federal government shutdown had little, if any, impact on payrolls. Manufacturing increased by a healthy 19,000, construction increased by 11,000 and retail increased by 44,000. … the US economy appears to be overcoming a summer swoon.
Now those numbers are from the establishment survey, which counted furloughed government workers as employed. The smaller household survey did not, and it showed. The unemployment rate ticked up to 7.3%, while the labor force participation rate and employment-population ratio fell sharply. But as Capital Economics points out, “With those Federal employees back at work now, however, all of this will be reversed in November’s report.”
So for this monthly only, Republicans will look to the bright side of the monthly jobs numbers — “See, the government shutdown was a non-event” — the Democrats the opposite. Of course the counterfactual here, one Democrats will try and sell, is that even more jobs would have been created without the government shutdown. Indeed, the Obama White House seems to like counterfactuals. Recall the “jobs created or saved” metric to judge the stimulus.
It should still be noted, however, that even at 202,000 jobs a month, it would take more than 5 years to return to prerecession employment levels, according to the Hamilton Project. As the Economic Policy Institute points out:
We need 8.0 million jobs to get back to the pre-recession unemployment rate, and at the average rate of growth of the last 12 months, that won’t happen for another five years. … There are currently roughly 6.1 million missing workers, and if these workers were in the labor force looking for work, the unemployment rate would be 10.8 percent instead of 7.3 percent.
Still, the decent jobs numbers, along with a not-so-bad third-quarter GDP report might make it more likely the Federal Reserve soon starts paring back its bond buys. RDG Economics:
The economy appears to have sustained growth momentum in recent months, which argues for the Fed to throttle back on QE (which Bernanke argued was a tool for managing the near-term momentum of the economy) and we expect this announcement at the next Fed meeting (to be foreshadowed by speeches pointing to such a possibility).