Pethokoukis, Economics, U.S. Economy

The odd October jobs report: The US government shutdown failed to shutdown the US economy

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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).

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

12 thoughts on “The odd October jobs report: The US government shutdown failed to shutdown the US economy

  1. The Democrats will forget to mention that those gov workers got PAID while not working! Meanwhile many gov contract workers at the base commissaries, other base services, Lockheed, and many other businesses shutdown for 3-20 days and will not get back pay.

    • You are being misleading. Gov defense contract workers worked during the shutdown and got paid because the contracts were still in force. Only 18% of the Gov was shutdown. Yawn

      • Larry, Try again when you have the facts. Base commissaries in the states were closed for 5 days and the non-gov staff (roughly 70%) did not get back pay. My wife can attested to that small paycheck.

        Lockheed closed various segments of their military production lines when they couldn’t continue without government payments, inspections or other actions. They reported closures of 3 to 8 days in several news stories. I’m pretty sure every defense contractor dealt with the same issues.

        FYI. That 18% number was calculated AFTER 400K Defense Dept civilians went back to work along with the 400K that never stopped working. The minimum of gov civilians working was likely in the 50% to 55% range.

  2. Remember how so many folks wanted to delay return of Social Security’s temp 2% reduction because that $100 per year for average American was going to hurt the economy? And it did slow things down.

    What’ll happen when folks are paying an extra $100, $200, $500 for health insurance monthly to our economy? This is going to seriously hurt consumer discretionary spending at restaurants, malls, etc!

    Job numbers are going to dive over the next 6 months as this black hole called Obamacare starts up.

  3. The government shutdown also failed to shutdown the government. 83% was determined “essential” with the park service doing more work during that 16 days than they ever do during normal operations.

  4. The drop in Labor Force Participation Rate is shocking.

    Back to 1978 levels, and that is not explained at all by demographics.

    It is explained by massive welfare dependency and use of SSDI, about to go completely broke.

  5. The author states that these are ” decent numbers “. maybe on another planet but here on planet Earth, USA they are horrible. These jobs are mostly seasonal and the labor participation rate is the real true indicator. If the fed lets off the QE throttle anytime soon there will be a crash of epic proportions. The economy is very sick..

  6. Why is no one talking about how these numbers are being affected by the implementation of Obamacare…this smokescreen of the evil GOP causing the shutdown and how it cripples the economy for months and months will be the perfect cover for the beginning of the disembowelment of the US economy due to Obamacare. Buckle your seatbelts, and pray people wake up before it’s too late.

  7. Even with the house GOP trying however they can to bring down the economy to prove a point, we are in a recovery. Pre- recession jobs as a measure don’t count. People were building houses, furniture and appliances for a bubble.The economy is slowly growing. The deficit is going down, 20-45 million people will begin to see health care professionals. Sorry folks, but the Dems know how to make the economy work. Reagan cut taxes and spent like a drunken sailor raising the debt limit 17 times. Clinton had to clean up his mess and Obama is now at work cleaning up the “W” mess. After the GOP loses the house in 2014, perhaps they will decide to be part of the solution instead of the problem. The sky is not falling.

  8. It is always a mistake to put too much emphasis on a single month’s data. That is especially true for October where the two surveys show disparate results. We will have to see what happens between now and the end of the year and beyond to see if the shutdown affected any employment trends.

    That is why I prefer the total employment data (http://data.bls.gov/timeseries/CES0000000001). Here you can see that we have been adding jobs for almost four years, but that we are still down about 1.5 million jobs versus the prior peak. In addition, we have added about 1.5 million people to the labor force in that time. That leaves us short about 3 million jobs or a little less than two years of jobs growth. Figure the labor force will grow by another million during the next two years and we need to add four million jobs during that time.

    @mesa – The labor force participation rate is on a long term downward trend, which can be seen most clearly by looking at the data for men (http://data.bls.gov/timeseries/LNS11300001). Adjust the start year to 1948 and you see that the rate has been falling since we started tracking the statistic. This was masked by large numbers of women entering the work force after the Civil Rights Act of 1964 made discrimination illegal. But the rate for women has been going down for over ten years as well. The combined rate will continue to decline going forward.

  9. This is a stupid premise and the economy vis a vis “jobs” did not improve in any measurable sense. In fact, if one takes the time to divest themselves of the government propaganda/disinformation tit, you can discover that the real U6 unemployment rate is above 14%. It’s only a matter of seeking information. If you know how to use a library, a declining skill in this era, it is a simple matter to also seek this information on the internet. Please, people, stop being propagandized/indoctrinated. If you wish to believe something, go for it, but by all means, in these times, verify it. We are being lied to on an astronomical scale. Don’t trust one thing you hear or are told. Grab the reins, dig, find out for sure. You will be amazed by what you discover. God Bless

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