U.S. added surprisingly strong 204,000 jobs in Oct.
The government shutdown was a bust.
Fears the shutdown that furloughed hundreds of thousands of federal workers for more than two weeks would ripple through the economy, curtailing hiring in October, turned out to be unfounded.
Employers produced a surprising 204,000 jobs in October, the Labor Department reported on Friday, spurring optimism that this month should produce another healthy round of gains because the economy appears resilient.
The job market was building momentum going into the holiday season with the agency revising September and August job gains upward by a combined 60,000.
“This bodes well for November,” said Gus Faucher, senior economist at PNC Financial Services Group, who termed the October report a “blockbuster.”
“And it looks like we’ll have momentum heading into the end of the year.”
Analysts note that job gains of recent months, combined with modest increases in pay, could encourage more spending. Growing demand for homes should support construction. And auto sales are likely to stay strong because many Americans are buying vehicles after putting off big purchases since the recession struck nearly six years ago.
Faucher said he expects November to generate more than 150,000 jobs but fewer than 200,000.
One sour spot in the jobless report was the unemployment rate, which edged up to 7.3 percent in October from 7.2 percent in September, probably because furloughed federal workers were temporarily counted as unemployed.
Unemployment in the seven-county Pittsburgh area was 6.8 percent in August, according to the latest data. September data for the metro area were not reported because of the 16-day government shutdown last month, and October information is not yet available.
The employment gains sent the stock market to a record high close as investors viewed the report as an encouraging sign for the economy but not strong enough to prompt the Federal Reserve to curtail its monthly purchases of $85 billion in bonds to stimulate economic growth.
Optimism about the U.S. jobs picture for the rest of the year stems from the strength of private-sector hiring last month. The additional 212,000 private-sector jobs in October erased the 8,000 decrease in government jobs.
The largest employment gains last month were the 53,000 new jobs in leisure and hospitality. That’s a “positive signal for the economy” because it means consumers’ discretionary spending is increasing, said Kenneth Mayland, economist at Clearview Economics, Pepper Pike, Ohio.
Retail added 44,000 jobs in October versus a monthly average of 31,000 in the preceding 12 months. Some perceived the increase as earlier than usual hiring by major retailers, which would take the steam out of normally heavy November job gains. But Faucher noted retail gains were widespread, with 12,000 in food and beverage stores, for instance.
A 21,000 increase in the number of professional and technical jobs last month also signaled hiring momentum, said Faucher. It showed that the services segment deemed most vulnerable to the government shutdown is more resilient than expected.
The stock market initially fell with the release of the report because investors feared the strength would prompt the Fed to end its stimulus policy. But stock investors reassessed their views and sent the Dow Jones industrial average up 168 points to a record close of 15,762.
The yield on the 10-year Treasury note climbed to 2.75 percent from 2.60 percent late Thursday, indicating some investors remain worried the Fed might taper its bond-buying soon.
Mayland said the government shutdown should do little to hurt U.S. economic output for the October-December quarter. Furloughed government workers got back pay that they will spend, and government spending was postponed but not lost, he said.
He projects gross domestic product this quarter will grow at a 2.5 percent annual rate, down slightly from the surprisingly good 2.8 percent for the summer quarter.
The job growth in October was better than the 190,000-a-month average for the prior 12 months. The average includes upward revisions of jobs to 163,000 in September from an initial 148,000, and to 238,000 in August from an initial 193,000.
“Maybe the government should be shut down more often,” said Mayland.
The government shutdown resulted in the furloughs of about 800,000 federal workers for some or all of 16 days, from Oct. 1-16.
The Associated Press contributed to this report. Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or [email protected].