WASHINGTON (Reuters) - U.S. job growth likely slowed sharply in October with the unemployment rate ticking higher as a partial shutdown of the government kept workers at home, undercutting an already lethargic labor market.
Non-farm payrolls are expected to have risen by only 125,000 jobs last month, according to a Reuters survey of economists, down from an increase of 148,000 in September.
That would be well below the 178,000 jobs monthly average over the first nine months of the year. The unemployment rate is forecast to edge up to 7.3 percent from September’s nearly five-year low of 7.2 percent.
Economists estimate the 16-day federal shutdown reduced payrolls by as much as 50,000 jobs last month, and they expect them to bounce back in coming months. Even so, it would only suggest the labor market remains on its gradual recovery course.
The government closure started on October 1 and lasted through the survey periods for both the payrolls data and the unemployment rate.
The Labor Department will release the closely watched report on Friday at 8:30 a.m. EST, a week later than originally scheduled because the shutdown delayed the gathering of data.
“It’s going to be difficult to interpret what happened in the labor market in October. I wouldn’t put too much weight on the employment report one way or another,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.
Private payrolls are seen bearing the brunt of the fallout, with little hit expected to government employment as the hundreds of thousands of federal workers furloughed received retroactive pay.
The survey of employers from which payrolls are constructed counts people as employed if they received pay for any part of the pay period that includes the 12th day of the month.
Available evidence from claims for jobless benefits and a private-sector employment tally from payroll processor ADP suggests government contractors and other workers whose jobs depend on federal government funding were sent home without pay.
“It is basically impossible to determine how many private sector workers were affected by the shutdown as well as the timing of their pay periods and the specific arrangements made because of the shutdown,” said Daniel Silver, an economist at JPMorgan in New York.
“We expect these indirect effects of the shutdown to be dispersed across a variety of industries, so it is unlikely that we will be able to see a clear impact of the shutdown in a specific sector.”
While furloughed government workers probably had little direct impact on payrolls, they are expected to have pushed up the unemployment rate last month.
The household survey from which the jobless rate is derived will count these federal workers as being unemployed even though they expected to be recalled.
Given the distortions, the data will likely be of little value to Federal Reserve officials, who last month decided to stick with their current pace of monthly bond purchases as they try to nurse the economy back to health.
“Assuming people taken off the payrolls because of the shutdown were rehired once the shutdown ended, some of the reduction in October payrolls should be undone in November,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
“It could take a few months before reports are totally clean of shutdown distortions, however.”
Away from the shutdown, payroll growth was also likely held back by a reversal in state and local government employment after a burst of hiring. State and local government added a total of 67,000 jobs between August and September, the bulk of them in education.
Economists said the gains were the result of difficulties adjusting the data for seasonal fluctuations at the start of the new school year.
While the work week is seen steady at 34.5 hours last month, the risk is high that it could have dipped because of furloughs among government contractors and other nonfederal workers affected by the shutdown. Hourly earnings are seen edging up 0.2 percent, keeping in line with the trend.
Reporting by Lucia Mutikani; Editing by Tim Ahmann and Chris Reese