U.S. job growth unexpectedly accelerated in October as employers shrugged off a government shutdown, suggesting the budget standoff had a more limited impact on the economy than initially feared.
Employers added 204,000 new jobs to their payrolls last month, the Labor Department said on Friday. The unemployment rate, however rose to 7.3 percent from September's nearly five-year low of 7.2 percent.
* The department said there had been no "discernible" impact on payrolls from the 16-day federal government shutdown
* The report also showed 60,000 more jobs created in September and August than previously reported
* Economists polled by Reuters had forecast payrolls rising 125,000 in October and the unemployment rate ticking up a tenth of a percentage point to 7.3 percent
DOUG COTE, CHIEF MARKET STRATEGIST, ING U.S. INVESTMENT MANAGEMENT, NEW YORK:
"There is a false expectation the Fed won't move until March. Inflation is getting to its target and with a better-than-expected-read here, we could get a taper in December or January and I don't think that was priced in. I don't think the Fed can defend not tapering sooner than current market consensus."
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON D.C.:
"No matter how you slice this number it is a positive report from a headline perspective as well as the strong upward revisions. Overall it was very positive and shows there was no meaningful impact from the government shutdown. This report, combined with the strong GDP report from yesterday should revive talk of Fed tapering before March, possibly in December. The market was bracing for a disappointing number, below consensus, so this lays the groundwork for a sustainable improvement in the dollar as well."
KATHY JONES, FIXED-INCOME STRATEGIST, CHARLES SCHWAB, NEW YORK:
"It's a bit of a mess of a report because you don't know about the reliability of the numbers. The BLS is telling us that there's not much impact from the furloughed government workers. They were not counted as unemployed. We don't know about those companies that were government contractors who may have laid people off during the government shutdown.
"The decline of 735,000 in the number of people working - that drop could have captured some of the furloughed government workers. The workweek was flat and revised down for previous months. Average hourly earnings were up only 0.1 percent. So although the headline number was stronger than expected, the underlying data do not indicate a big increase in the demand for labor. There's a lot in here that's a little bit dubious.
"It may be that the labor market is beginning to pick up some steam but I would take it with a grain of salt. It's a very mixed picture."
DOUGLAS BORTHWICK, MANAGING DIRECTOR, CHAPDELAINE FOREIGN EXCHANGE, NEW YORK:
"The headline is spectacular, but the number everyone is looking at is the change in household employment, which fell 720,000. Another big concern is the labor force participation rate dropping. The amount of people leaving the workforce is astounding and the change in nonfarm payrolls isn't keeping up with that side of the equation. That is stopping the dollar from strengthening as much as you would expect on the headline. I think people leaving the workforce is very negative for the economy. The Fed has to remain cautious."
RUSSELL PRICE, SENIOR ECONOMIST, AMERIPRISE FINANCIAL SERVICES INC, TROY, MICHIGAN:
"What it reflects is just how tightly most American companies have been running as far as their labor force goes. It shows that even with the relatively modest demand growth environment that companies are still incentivized to hire to fill the relatively weak demand that we're seeing.
"Most economists were expecting that business sentiment, particularly when it comes to hiring, would have been much more affected by the government budget battle and the shutdown. They expected businesses to have been much more cautious during the period. Clearly what transpired were businesses viewed the shutdown as a temporary phenomenon and that the economy was still growing and would continue to grow going forward.
"What was also important and it was certainly positive, was the personal spending and income report, because that showed that personal incomes had been growing much stronger than previously thought pace, and that certainly is positive for the consumer as we head into the holidays."
CAMERON HINDS, REGIONAL CIO FOR WELLS FARGO PRIVATE BANK IN OMAHA, NEBRASKA:
"This is a shockingly impressive number. I don't think I heard a single person project the number could be this high. We thought there were going to be a lot of cross currents relative to the government shutdown, but it certainly looks like the private sector drove this very healthy number. As an aside you heard some talk about the unemployment rate going back to 7.4, 7.5 percent and it just inched up a little bit. Immediately this is a case of the stock market taking good news as bad news as well as the bond market.
"We will see what happens behind the doors at the Fed but certainly there will be some reassessment of at least the possibility of a December and/or January tapering. Also in conjunction with the third-quarter GDP number, where at least the headline number was better than expected. This is interesting. Our viewpoint is eventually we believe we truly need to have good news and the market take it as good news to propel the market substantially higher. Longer term, even though the market short term is saying this is a concern, we would say this is good news."
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:
"Obviously October payroll growth was a lot stronger than forecast particularly in private payrolls. With upward revisions to August and September numbers, this just emphasizes the unreliability of first-round estimates of anything.
"There probably will be no rush to taper in December. It's a message that things are not sliding off the table.
"The unemployment rate rose to 7.3 percent. It just emphasizes that month-to-month variations are not to be taken seriously. You have to look at the moving averages which show us to be in the 7.2 percent to 7.3 percent for three months running on unemployment."
TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:
"Overall this was a resoundingly strong report, particularly in the context of the government shutdown which was supposed to wreak havoc on this number. Make no mistake there were some issues with the household survey, but people will likely overlook that due to technical issues.
"This shows job growth was strong at the start of the fourth quarter. Having said that, this report does not change my forecast for the Fed and I do not believe they will taper this year."
SAM BULLARD, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:
"A lot of the sectors that were stalwarts during the economy and were depressed in September bounced back in October. We still need to be cautious here. There could still be a lot of volatility from the shutdown. We need to see more of the hard data. For the Fed, they will be cautious even after this report. They probably want to see more data before making a move on tapering, but the probability of a December tapering is back on the table."
RICHARD FRANULOVICH, SENIOR CURRENCY STRATEGIST, WESTPAC, NEW YORK:
"It's an impressively strong jobs number in the face of a government shutdown and underlying weakness in the U.S. economy. This number has totally re-written the outlook for the U.S. The job gains look pretty broad-based. I have been dismissive of a December taper from the Federal Reserve, and now it looks like a possibility."
THOMAS COSTERG, U.S. ECONOMIST, STANDARD CHARTERED, NEW YORK:
"I would say that the details, if you look beyond the headline, are quite soft. The participation rate dropping sharply could still raise some eyebrows at the Fed. I would also highlight the fact that earnings growth is quite subdued. So yes, the headline is stronger than expected, but some details still suggest some problems."
STOCKS: U.S. equity index futures turned negative
BONDS: U.S. Treasury debt prices extended their fall
FOREX: The dollar strengthened against the euro and yen
(Americas Economics and Markets Desk; +1-646 223-6300)