Payroll Gains in U.S. Probably Cooled Amid Government ShutdownVictoria Stilwell
Employers in the U.S. probably added fewer workers in October and the jobless rate rose for the first time in five months as the effects of the partial federal government shutdown rippled through the labor market, economists said before a report today.
Payrolls increased by 120,000 following a 148,000 gain the prior month, according to the median forecast of 91 economists in a Bloomberg survey. Unemployment climbed to 7.3 percent from an almost five-year low of 7.2 percent as federal workers were furloughed during the 16-day closing, economists projected.
The fiscal impasse in Washington may have prompted some private employers to reconsider hiring plans or send workers home altogether, making it difficult for the economy to gain traction. The Federal Reserve has put off plans to begin reining in record monetary stimulus as demand shows signs of cooling and job gains lag behind the average in the first half of the year.
“The labor market is one that is improving but at what remains a frustratingly slow pace,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama. “Payrolls had started to slow a little bit before the shutdown. We need the overall rate of growth to pick up.”
The Labor Department figures, which were delayed by the shutdown and originally slated for Nov. 1, will be released at 8:30 a.m. in Washington. Bloomberg survey estimates for payrolls ranged from increases of 50,000 to 175,000.
Forecasts for the unemployment rate, derived from a separate Labor Department survey of households, ranged from 7.2 percent to 7.6 percent.
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, will extrapolate 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 survey of employers was probably less affected by the lapse in appropriations. That poll references the pay period that includes the 12th of the month, and anyone receiving pay for any part of that time will be counted as having a job, the Labor Department said. Furloughed employees of government agencies were guaranteed back pay for the entire shutdown.
Private hiring, which excludes government agencies, probably increased 125,000 in October, almost matching an advance of 126,000 the month before, economists projected. Manufacturing payrolls increased by 5,000 after a 2,000 gain the month before, according to the Bloomberg survey.
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 the Seattle-based company 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.
A report yesterday showed household purchases and business spending on equipment slowed in the third quarter, even as 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.
Economists trimmed their fourth-quarter growth forecasts after the shutdown, to a 2 percent annualized rate. At the start of the budget impasse, the median forecast in a Bloomberg survey called for a 2.4 percent pace.
“We think that there is an ongoing trend of gradual improvement in the labor market that has been temporarily interrupted by distortions caused by the government shutdown,” economists led by Ward McCarthy at Jefferies LLC in New York wrote in a Nov. 6 note to clients.
While the labor market has shown improvement, companies need to see stronger demand to justify adding more workers. Limited income growth in the U.S. has restrained consumer spending, with companies such as Hallmark Cards Inc. adjusting payrolls to cut costs.
The Kansas City, Missouri-based closely held company is eliminating as many as 250 positions through the end of 2014 as it streamlines the development process for its greeting cards and exits its party business, which sells products such as plates, paper cups and napkins, according to a Nov. 4 statement.