Payrolls jumped 204,000 as U.S. economy weathered shutdown

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 today in Washington. The median forecast of 91 economists surveyed by Bloomberg called for a 120,000 advance. The jobless rate rose to 7.3% from an almost five-year low.

The figures indicate companies adhered to hiring plans with an outlook for stronger sales in the aftermath of the 16-day budget impasse and a debate over raising the nation’s debt ceiling. Treasuries and stock futures fell on speculation the report will prompt an earlier reduction of asset purchases by the Federal Reserve.

“The government shutdown really didn’t have a material impact on employment,” said Brian Jones, senior U.S. economist at Societe Generale in New York, whose forecast for a payroll gain of 175,000 was the highest in the Bloomberg survey. “The labor market is actually quite healthy, regardless of what people may think. The economy is doing better.”

The contract on the Standard & Poor’s 500 Index expiring in December dropped 0.3% to 1,739.80 at 8:51 a.m. in New York. Treasuries lost the most in two months, pushing up the yield on the 10-year Treasury note 12 basis points, or 0.12 percentage point, to 2.72%.

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 difference between today’s outcome on payrolls and the average estimate of economists surveyed by Bloomberg was 3.4 times larger than the poll’s standard deviation, or the average divergence between what each economist forecast and the mean. That was the biggest surprise since April.

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

Participation Rate

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

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.

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