National News

November 9, 2013

The shutdown’s surprise effect on jobs numbers

The government shutdown may have affected October’s jobs numbers. But not how you think.

For weeks, the White House had braced for a dour report on hiring, with economists and aides lowering expectations and blaming last month’s partial shutdown for the inevitable bad news to come.

Then Friday’s numbers materialized: Employers appeared to have ignored the shutdown and hired away, to the tune of 204,000 jobs in October.

The shutdown, it seemed, had had no effect.

Not so fast.

In the height of irony, the 16 days of federal worker furloughs and government disruptions may have helped, not hurt, the improved jobs picture.

Typically, jobs numbers are announced on the first Friday of the month. Because of the shutdown, the Bureau of Labor Statistics delayed the release of the jobs numbers by one week to allow more time to collect payroll and household data. That extra time resulted in an above average response rate for payroll data.

So, not to get hung up on numbers, but the average participation rate by employers in payroll surveys for the nine months before October was 76.4 percent. That meant that in subsequent months, as more data was collected, the hiring numbers were adjusted, often upward.

In October, with an extra week to collect data, the participation rate was 83.5 percent, the highest ever.

A robust hiring number, to some economists, now felt slightly inflated.

“It seems that when the initial response rate is high, the initial payroll number is often, though certainly not always, stronger than the prior trend,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note.

In other words, if the jobs numbers in prior months were based on a lower participation rate, a stronger participation rate would skew the number up.

“Tentatively, we think the effect of this could explain all the overshoot in payrolls,” Shepherdson wrote.

As a result, some economists are predicting that when the October numbers are updated, they might be in for a downward revision and that November could yield a lower number as well.

“Businesses may have inadvertently counted employment for an extra week,” said Mark Zandi, chief economist at Moody’s Analytics. “That could juice up the number. That may mean that we actually get surprised next month with a much weaker number.”

The shutdown had another effect on the employment data.

Besides conducting a survey of employers, which gives data on actual hiring, the government also surveys households to determine the unemployment rate.

Furloughed federal employees were considered unemployed during the shutdown and thus contributed to the increase in the unemployment rate in October from 7.2 percent to 7.3 percent. Without the furloughs, the unemployment rate would have dropped.

Complicating things, some furloughed employees were counted as still employed. As a result, if they had been properly listed as unemployed, the jobless rate for October could have been higher than 7.3 percent.

But those are temporary anomalies and they won’t affect the November unemployment rate.

Even with data showing more hiring in the month, President Barack Obama on Friday stuck with the White House theme that the shutdown “harmed our jobs market.”

“The unemployment rate still ticked up and we don’t yet know all the data for this final quarter of the year, but it could be down because off what happened in Washington,” he said.

The data did have some warnings. Americans’ participation in the labor force went down.

“Even factoring out the impact of the shutdown, we have a lot fewer people in the labor force than you’d expect,” said Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities and former economic adviser to Vice President Joe Biden. “That pushed the unemployment rate down because they are not looking and it takes away from growth.”

Then he apologized for being a two-handed economist:

“I consider the (jobs) report evidence of a resilient American economy on the one hand, but some pronounced remaining weaknesses on the other.”

1
Text Only
National News
  • Gabriel Garcia Marquez, Nobel laureate, dies at 87

    Nobel laureate Gabriel Garcia Marquez crafted intoxicating fiction from the fatalism, fantasy, cruelty and heroics of the world that set his mind churning as a child growing up on Colombia’s Caribbean coast.

    April 18, 2014

  • 10 Things to Know for Friday

    Your daily look at late-breaking news, upcoming events and the stories that will be talked about Friday.

    April 17, 2014

  • Why high oil prices are actually good for airlines

    Airline executives frequently complain about fuel costs. But the truth is higher prices actually have been good for business.

    April 17, 2014

  • Armed robber was never told to report to prison

    After he was convicted of armed robbery in 2000, Cornealious Anderson was sentenced to 13 years behind bars and told to await instructions on when and where to report to prison. But those instructions never came.

    April 17, 2014

  • Hot models at this year’s New York Auto Show

    With more than 1 million visitors annually, the New York International Auto Show is one of the most important shows for the U.S. auto industry. Here are some of the vehicles debuting this year. The show opens to the public Friday.

    April 17, 2014

  • Study: Diabetic heart attacks and strokes falling

    In the midst of the diabetes epidemic, a glimmer of good news: Heart attacks, strokes and other complications from the disease are plummeting.

    April 17, 2014

  • 10 Things to Know for Thursday

    Your daily look at late-breaking news, upcoming events and the stories that will be talked about Thursday:

    April 17, 2014

  • Players protest rehiring of fired Minnesota coach

    The University of Minnesota-Mankato football team Wednesday boycotted the fired head coach who won his job back in an arbitrator's ruling last week, nearly two years after fighting accusations of child pornography and other misconduct.

    April 16, 2014

  • A year after background check defeat, modest goals

    Democratic worries about this November’s elections, a lack of Senate votes and House opposition are forcing congressional gun-control supporters to significantly winnow their 2014 agenda, a year after lawmakers scuttled President Barack Obama’s effort to pass new curbs on firearms.

    April 16, 2014

  • Dress codes: Where should schools set limits?

    They’re called leggings — popular fashion items that are tight-fitting pants to some, and glorified tights to others.

    April 16, 2014