Shutdown to weigh on jobs report

October’s jobs report could be dismal on Friday with the effects of the 16-day government shutdown clearly weighing on the figures. 

Last month’s numbers, delayed a week by the fiscal impasse, could run about 110,000, which would be the weakest since July. 

{mosads}But a look around at various estimates show a potentially bleaker picture — with estimates ranging as low as 80,000 to about 120,000 — all outside the framework of a healthy economy.

Economists estimate that the unemployment rate could jump to 7.5 percent from 7.2 percent in September, a steep increase considering the gradual drops in the past few years.

The ascent would be caused by government workers and contractors reporting that they were out of work during part of the month.

While 7.2 percent was the lowest rate since November 2008, the expected surge would be the worst since the jobless rate pushed up to 9.8 percent from 9.5 percent in November 2010. 

Mark Zandi, chief economist with Moody’s Analytics, estimates that the government shutdown reduced employment by an estimated 30,000 jobs in October because of furloughs in the private sector at businesses disrupted by the shutdown.

Approximately 400,000 furloughed government workers will be counted as unemployed, along with furloughed private sector workers, he said.

On a positive note, Zandi said an economy free of the uncertainty generated by Washington’s policymakers could finally pick up pace next year. 

“If lawmakers are able to increase the Treasury debt limit in a timely way early next year and do not shut the government down again, job growth should reaccelerate by next spring,” he said.  

“The economy is on the cusp of much stronger growth. Lawmakers simply have to do no harm.”

Underlying monthly job growth was near 175,000 throughout much of the past three years but has slowed to about 150,000 during the past several months. 

Zandi argues that the slowdown reflects the Jan. 1 tax increases and March spending cuts, which have been hitting the economy this year. 

If Congress doesn’t act, more sequester cuts will go into effect next year. 

Despite the rough looking numbers, economists argue that October might be an anomaly that will shake out in the next several months and provide a better picture as to where the economy is headed. 

“The jobs data will be muddled by the fallout from the shutdown until early next year,” Zandi said. 

In turn, that will probably mean that the Federal Reserve would hold off from tapering its $85 billion in monthly monetary stimulus until March. 

Employers added 148,000 jobs in September and 193,000 in August, according to preliminary estimates.

Meanwhile, the economy grew at a 2.8 percent rate in the third quarter, but many economists downplayed the report, which came in above expectations of 2 percent. 

Center for American Progress economist Adam Hersh said economic growth was driven almost entirely by an accumulation of inventories.

“The clearest headwind against a strengthening recovery remains the political obstructionism that has led to a sharp contraction in the contributions made by public spending and investment to the economy,” he said. 

Josh Bivens, research and policy director at the Economic Policy Institute, said there was little reason to tout the figure. 

The numbers “remain disappointingly weak for an economy with so much productive slack,” he wrote on Thursday.

Overall, though, many economists expect few long lasting effects from the government shutdown.

“Since income for those affected by the shutdown will recover quickly, the indirect effect is likely to be temporary, as consumption has probably been delayed rather than permanently lost,” said Keith Hall, the former commissioner at the Bureau of Labor Statistics and senior research fellow at George Mason’s Mercatus Center.

Hall looked into the effects of the government shutdown in 1995-96, and this economy would be lucky to get a similar boost. 

During the last government shutdown, federal workers were furloughed from Dec. 16, 1995, to Jan. 6, 1996. 

The Congressional Budget Office estimated that economic growth in the fourth quarter of 1995 fell by 0.5 percentage point, similar to estimates for this time around. 

After growing 2.3 percent in 1995, growth nearly doubled to 4.5 percent in 1996. 

Similarly, after payroll jobs actually declined in January 1996, the economy averaged 257,000 new jobs per month for the rest of the year as the growth boomed.