Payrolls rise less than expected; jobless rate falls

The unemployment rate dropped to 7.2 percent, the lowest in five years

Topics: Unemployment, Employment, Labor, Shutdown, U.S. Economy, ,

Payrolls rise less than expected; jobless rate fallsDozens of job seekers line up to enter a job fair in New York. (Credit: AP)

Oct. 22 (Bloomberg) — Payrolls climbed less than projected in September, indicating the U.S. economy had little momentum leading up to the federal government shutdown. The jobless rate fell to an almost four-year low

The addition of 148,000 workers followed a revised 193,000 rise in August that was larger than initially estimated, Labor Department figures showed today in Washington. The median forecast of 93 economists surveyed by Bloomberg called for a 180,000 advance. Unemployment fell to 7.2 percent, the lowest level since November 2008. The report, delayed by the 16-day shutdown that ended Oct. 17, was originally slated for Oct. 4.

Progress in the labor market depends on how quickly the world’s largest economy can bounce back from the loss of business and uncertainty caused by the fiscal impasse. The budget dispute weighed on fourth-quarter growth and will prompt Federal Reserve policy makers to wait until March before starting to trim stimulus, a Bloomberg survey showed last week.

“Hiring will remain modestly positive,” Jason Schenker, president of Prestige Economics LLC in Austin, Texas, said before the report. He was the top-ranked forecaster of payrolls in the past two years, according to data compiled by Bloomberg. “The unemployment rate will come down very gradually. The shutdown came at an inopportune time.”

Bloomberg survey estimates ranged from increases of 100,000 to 256,000. Revisions to prior reports added a total of 9,000 jobs to overall payrolls in the previous two months.

The unemployment rate, derived from a separate Labor Department survey of households rather than employers, was forecast to hold at 7.3 percent, according to the Bloomberg survey median.

 

Participation Rate

 

The participation rate held at 63.2 percent, matching the lowest since August 1978.

The September payroll figure reflects the pay period that includes the 12th of the month, two weeks prior to the federal shutdown. Today’s report doesn’t include any late responses from employers, indicating the figures will be subject to revision as is typical each month.

It will take some time to confirm or refute that the shutdown and political brinkmanship in Washington led to a sharp pullback in activity this month, so the data may be discounted, some economists said.

“Since the economy is potentially in flux and the data for October and November are subject to an unusual degree of distortion,” Fed policy makers are probably going to maintain stimulus for several more months, Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, wrote in an Oct. 21 research note.

 

Private Employment

 

Private employment, which exclude government agencies, rose 126,000 after a revised gain of 161,000. They were also projected to rise by 180,000, the survey showed.

Full-time employment climbed by 691,000 in September while part-time hiring dropped by 594,000.

Employment climbed at temporary-help agencies, wholesalers, transportation and warehousing businesses, and retailers. State and local government hiring also picked up.

Employment at factories increased by 2,000 following a 13,000 gain in the previous month. Construction companies added 20,000 workers, the most since February, and retailers took on almost 21,000 employees.

Average hourly earnings climbed by 0.1 percent to $24.09 in September from the prior month, and increased 2.1 percent over the past 12 months.

The average work week for all workers held at 34.5 hours in September.

 

Seasonal Hiring

 

Faster hiring that lead to bigger gains in wages would help to accelerate consumer spending, which accounts for about 70 percent of the economy. Even as the debate on fiscal policy heated up last month, retailers began announcing plans to add workers for the holiday-shopping season.

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Wal-Mart Stores Inc., the world’s largest retailer, is hiring 55,000 seasonal employees, a 10 percent rise from last year. Target Corp. said it plans to take on about 70,000 workers. Kohl’s Corp. will add about 53,000 workers for the holiday season, about the same as last year.

The projected gain in payrolls for September would still be below the average 195,000 monthly increase in the first half of 2013. Through August, the U.S. had recovered 6.8 million of the 8.7 million jobs lost as a result of the 18-month recession that ended in June 2009.

President Barack Obama last week signed legislation that funds the government through mid-January and suspends the nation’s $16.7 trillion debt limit, for now ending the threat of default, which economists had warned could tip the U.S. back into a recession.

The October employment report will be pushed back to Nov. 8 from the originally scheduled Nov. 1, according to the Labor Department.

 

Federal Reserve

 

Fed policy makers, scheduled to gather Oct. 29-30, are trying to gauge the strength of the U.S. expansion without federal economic data that was suspended after the government closing.

The central bankers will pare the monthly pace of asset buying to $70 billion from $85 billion at their March 18-19 meeting, according to the median of 40 responses in a Bloomberg survey last week.

“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben S. Bernanke said at a news conference following the Fed’s September meeting.

 

Shutdown Effects

 

While the labor market has shown improvement, uncertainty stemming from Washington related to the shutdown and the debt limit may have been a source of concern for employers.

San Francisco based 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.

Among other companies paring their workforce, San Francisco-based Wells Fargo & Co., the biggest U.S. mortgage lender, last week said it eliminated an additional 925 jobs in its home-loan unit and has cut more than 5,700 since midyear.

–With assistance from Chris Middleton in Washington. Editor: Vince Golle

 

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

 

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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