Quantcast
Get breaking news alerts via email

Click here to manage your alerts
FILE - In this Wednesday, Oct. 23, 2013 file photo, Luis Mendez, 23, left, and Maurice Mike, 23, wait in line at a job fair held by the Miami Marlins, at Marlins Park in Miami. The jobs report for October due out Friday, Nov. 8, 2013, could jump by the most in three years. But the figures will reflect the government’s partial shutdown, which coincided with 16 days in October. The trends for the job market will likely reverse themselves in coming months. (AP Photo/Lynne Sladky, FIle)
Why a spike in Oct. unemployment may not be so bad
First Published Nov 06 2013 11:34 am • Last Updated Nov 06 2013 11:34 am

Washington • The jobs report for October due out Friday may be bleak. It might even be scary. The unemployment rate could jump by the most in three years. Hiring may slow from an already weak pace.

Don’t panic.

Join the Discussion
Post a Comment

The ugly figures will reflect the government’s partial shutdown, which coincided with 16 days in October. The trends for the job market will likely reverse themselves in coming months.

"It’s going to be a very messy report, and I don’t think we think should take it at face value," said Jennifer Lee, an economist at BMO Capital Markets.

Economists warn that the unemployment rate could surge as high as 7.5 percent from 7.2 percent in September. That would be the steepest one-month rise since 2010.

The number of jobs added in October could slow to roughly 120,000 from the 148,000 added in September. That isn’t healthy. In the first nine months of this year, the average job gain was 180,000.

The shutdown will be mostly to blame. But its effect on the data won’t be easy to tease out. Economists have all but thrown up their hands trying to forecast Friday’s figures or to suggest what they might mean. However the numbers turn out, the distortions mean the monthly jobs data will be less useful in gauging the economy’s health than they normally are.

"We have much less confidence in these numbers than usual," economists at Bank of America Merrill Lynch wrote in a note for clients.

Why the confusion?

Consider how the jobs report is compiled: It’s derived from two separate surveys. Each survey will be affected differently by the shutdown.


story continues below
story continues below

One is a household survey. Government workers ask adults in a household whether they have a job. Those who don’t but are looking for one are counted as unemployed. That’s how the unemployment rate is calculated.

The other is a payroll survey. The government asks mostly large companies and government agencies how many of their employees worked or received pay, typically during the second week of the month. This survey produces the number of jobs gained or lost.

Suppose you’re a federal worker who was furloughed by the shutdown. The payroll survey would consider you employed. But the household survey would count you as unemployed.

Why the disparity?

Because furloughed federal employees received back pay for the time they didn’t work. So for the purposes of the payroll survey, they were employed. The same is likely true for government contractors who were temporarily laid off. Many were probably paid for at least part of the time covered by the payroll survey. So the payroll survey will consider them employed.

That’s why October’s job gain isn’t expected to drop much.

The household survey takes a different approach: It will count both the federal workers and the contractors as unemployed because they weren’t working during the survey period.

The shutdown furloughed about 450,000 federal employees in the second week of October. If the number of unemployed rises by that much in October’s jobs report, the unemployment rate could reach 7.5 percent.

There will be other distortions. Some people with private employers might have been affected. Examples would be employees of hotels and restaurants near national parks that were closed. Those workers might have been temporarily laid off, thereby boosting the unemployment rate.

Yet as long as they were paid for even one day of work during the survey period, the payroll survey would count them as employed.

"It is basically impossible to determine how many private-sector workers were affected by the shutdown," economists at JPMorgan Chase wrote in a note to clients.

Next Page >


Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.