Despite shutdown, October jobs report still good news for economy

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Article Highlights

  • The fact that the data come from two different surveys means that it's natural that from time to time you are going to see them telling different stories.

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  • There is a tepid recovery; we are adding jobs, but we're not adding enough jobs.

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  • we have a lot of work left to do before the labor market is healed.

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Summary

The October jobs report showed a surprise spike in hiring with employers adding 204,000 jobs last month. Despite the good news, the unemployment rate rose to 7.3 percent. How is this possible? Paul Solman explains how the 16-day shutdown may have warped the numbers and what the data means for the overall economic recovery. 

Transcript 

JUDY WOODRUFF: This month's jobs report was the first one since the government shutdown that captured some of its wider impact. It also came one day after a government report found stronger-than-expected growth in the U.S. economy just before the shutdown.

NewsHour economics correspondent Paul Solman puts some perspective on the latest data, part of his ongoing coverage on Making Sense of financial news.

PAUL SOLMAN: It was a tale of two jobs reports. Employers added 204,000 jobs in October, yet the unemployment rate rose to 7.3 percent. How could both happen? Well, first, unemployment is based on a survey of households, the jobs number, on a separate sample of employers, the so- called establishment survey.

MICHAEL STRAIN, American Enterprise Institute: The fact that the data come from two different surveys means that it's natural that from time to time you are going to see them telling different stories.

PAUL SOLMAN: And surveys, of course, have margins of error. So, any conclusion, we asked Michael Strain of the conservative American Enterprise Institute.

MICHAEL STRAIN: There is a tepid recovery; we are adding jobs, but we're not adding enough jobs. Unemployment rate is -- The unemployment rate is doing OK, but it's not falling nearly fast enough. And we have a lot of work left to do before the labor market is healed.

PAUL SOLMAN: Dean Baker is, if you will pardon us, top dog at the left-leaning Center for Economic and Policy Research. Never trust any one month's numbers, he says, but while not the best of times, October certainly wasn't the worst. In fact:

DEAN BAKER, Center for Economic and Policy Research: Over 200,000 jobs being created in October, I think more -- more than I expected, more than most economists expected, and upward revisions for the prior two months. So we're averaging over 200,000 the last three months, which is better than what we have seen.

PAUL SOLMAN: Actually, the 16-day shutdown delayed the jobs report by a week, which, Strain says, warped the final numbers.

MICHAEL STRAIN: The household survey asked households for their employment status during the week that contains the 12th the month. Collection usually begins immediately thereafter. In this case, the government was shut down, so collection efforts were delayed by a week. So you're asking households to remember what they were doing two weeks ago, as opposed to remember what they were doing one week ago.

And while that may seem like a minor change to a lot of people, evidence shows that changes like that can actually have a big impact on the quality of the data.

PROTESTER: End the shutdown!

PROTESTERS: End the shutdown!

PAUL SOLMAN: What's more, explains Baker, temporarily furloughed federal workers were counted as unemployed in the household survey, since, technically, they weren't working. That hurt the unemployment rate.

DEAN BAKER: So the household survey showed a drop in employment, in government employment of about 450,000. So, these are people that were employed by the federal government, presuming mostly employed by the federal government. They're on furlough. They don't -- they're asked, were you working the week of the 12th? Answer, no.

PAUL SOLMAN: But when it came to the establishment survey, government agencies reported these workers did have jobs. Regardless, the private sector added far more jobs than expected, even during the shutdown.

DEAN BAKER: I was actually surprised. It's hard-pressed to find any evidence of the shutdown in the sectors I was looking to. I was looking at places like restaurants, hotels, because I was expecting that you had areas -- the national parks were closed, here in D.C., a lot of the tourist sites. People -- if you were planning a trip to D.C., I assume a lot of people canceled.

So, I would have expected that there would be some falloff there. In fact, there was very rapid growth, over 50,000 jobs in that amusement-entertainment sector of the economy. So, you're really hard-pressed to find the evidence of the shutdown in the establishment survey.

(APPLAUSE)

PAUL SOLMAN: During a speech today at the Port of New Orleans, President Obama offered his own framing of the report.

PRESIDENT BARACK OBAMA: We added about 200,000 new jobs last month. But there is no question that the shutdown harmed our jobs market. The unemployment rate still ticked up, and we don't yet know all the data for this -- this final quarter of the year. But it could be down because of what happened in Washington.

PAUL SOLMAN: The White House's estimate of the shutdown's cost: more than $2 billion in back pay and lots of lost productivity.

And, says Michael Strain, the shutdown means the data are even less certain than usual.

MICHAEL STRAIN: But I would expect that next month's to be much more reliable than this month's.

PAUL SOLMAN: The never-ending story will pick up again on December 6.

Watch the full video here.

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About the Author

 

Michael R.
Strain
  • Michael R. Strain is a resident scholar at the American Enterprise Institute, where he studies labor economics, public finance, and applied microeconomics. His research has been published in peer-reviewed academic journals and in the policy journals Tax Notes and National Affairs. Dr. Strain also writes frequently for popular audiences on topics including labor market policy, jobs, minimum wages, federal tax and budget policy, and the Affordable Care Act, among others.  His essays and op-eds have been published by National Review, The New York Times, The Weekly Standard, The Atlantic, Forbes, Bloomberg View, and a variety of other outlets. He is frequently interviewed by major media outlets, and speaks often on college campuses. Before joining AEI he worked on the research team of the Longitudinal Employer-Household Dynamics program and was the manager of the New York Census Research Data Center, both at the U.S. Census Bureau.  Dr. Strain began his career in the macroeconomics research group of the Federal Reserve Bank of New York.  He is a graduate of Marquette University, and holds an M.A. from New York University and a Ph.D. from Cornell.


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