Payrolls Jumped 204,000 as US Economy Weathered Shutdown

Friday, 08 Nov 2013 09:00 AM

 

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Payrolls in the U.S. increased more than forecast in October, a sign that employers were optimistic the world’s biggest economy would weather the effects of the federal government shutdown.

The addition of 204,000 workers followed a revised 163,000 gain in September that was larger than initially estimated, Labor Department figures showed in Washington. The median forecast of 91 economists surveyed by Bloomberg called for a 120,000 advance. The jobless rate rose to 7.3 percent from an almost five-year low.

The figures indicate companies adhered to hiring plans with an outlook to stronger sales in the aftermath of the 16-day budget impasse and a debate over raising the nation’s debt ceiling. The data also underscore the view of Federal Reserve officials that employment conditions are on the mend as they look beyond fiscal restraint in considering when to dial back record monetary stimulus.

“The economy isn’t as weak as people seem to think it is in the fourth quarter,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “The job market is in a phase of grinding improvement.”

Factory Jobs

Payrolls increased at manufacturers by the most since February, retailers added about twice as many workers as the month before, and leisure and hospitality employment was the strongest in six months.

Bloomberg survey estimates ranged from increases of 50,000 to 175,000. Revisions to prior reports added a total of 60,000 jobs to overall payrolls reports in the previous two months. The report, delayed by the shutdown, was originally slated for Nov. 1.

The unemployment rate, derived from a separate Labor Department survey of households rather than employers, was forecast to rise to 7.3 percent from September’s 7.2 percent, according to the Bloomberg survey median. The household figures showed more Americans dropped out of the labor force.

The participation rate, which indicates the share of working-age people in the labor force, decreased to 62.8 percent, the lowest since March 1978, from 63.2 percent a month earlier.

Government Shutdown

As many as 800,000 federal workers were furloughed during last month’s government shutdown. The Labor Department, in its survey of 60,000 households, extrapolated the effects of the impasse to arrive at the unemployment rate. Americans who weren’t working during the week spanning Oct. 6 to Oct. 12 were counted in the household survey as unemployed, even if they received, or anticipated getting, pay retroactively, based on a statement from the Bureau of Labor Statistics.

The separate survey of employers referenced the pay period that includes the 12th of the month, and anyone receiving pay for any part of the period was counted as part of the payroll tally, the Labor Department said.

Private employment, which excludes government agencies, rose 212,000 after a revised advance of 150,000. They were projected to rise by 125,000, the survey showed.

Factories added 19,000 workers in October, reflecting in part gains in the automobile industry. Retailers added 44,400 jobs and employment in the leisure industry climbed 53,000.

Government employment decreased by 8,000 in October as federal agencies cut payrolls.

Hourly Earnings

Average hourly earnings increased by 0.1 percent to $24.10 in October from the prior month, and climbed 2.2 percent over the past 12 months.

The average work week for all private workers held at 34.4 hours in October.

Workers at America’s top federal contractors were among those affected by the lapse in appropriations. Lockheed Martin Corp., which had $36.9 billion in government contracts in 2012, put 2,400 workers on leave the second week of October.

URS Corp., a provider of engineering and construction services, furloughed about 3,000 employees, saying the total includes employees idled by the closing of a government facility where they work as well as those directed by U.S. officials to halt operations or cut staffing.

Third Quarter

A report yesterday showed household purchases and business spending on equipment slowed in the third quarter, even as a buildup in inventories unexpectedly boosted the pace of economic growth.

The 2.8 percent annualized gain in gross domestic product followed a 2.5 percent increase in the prior three months, Commerce Department figures showed. Final sales, which exclude unsold goods, rose 2 percent in the third quarter as consumer spending climbed at the slowest pace since 2011 and corporate investment fell.

Still, many retailers are taking on workers as they look ahead to the most important time of the year for sales.

Amazon.com Inc. is among those hiring. The world’s largest online retailer is creating more than 70,000 full-time seasonal jobs in its U.S. fulfillment centers during the holidays to meet increased demand and expects to convert ”thousands” of those positions to permanent roles after the season ends as it did in 2012, according to a statement.

In the three months ended in September, payrolls climbed 143,000 on average, less than the 195,000-a-month gain in the first half of 2013. Through September, the U.S. had recovered 7 million of the 8.7 million jobs lost as a result of the 18-month recession that ended in June 2009.

Fed policymakers said last week they needed to see more evidence the economy will continue to improve before they trim $85 billion in monthly purchases of Treasury and mortgage debt. Fiscal policy “is restraining economic growth,” the Federal Open Market Committee said Oct. 30 at the end of a two-day meeting in Washington.

© Copyright 2014 Bloomberg News. All rights reserved.

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