Cloud hangs over U.S. economy , hiring plans
Job creation in October likely weakened in shadow of government shutdown
WASHINGTON (MarketWatch) — Flying blind is not easy for even the best of pilots. And right now, veteran economists find it almost impossible to tell how fast the U.S. is growing or how many new jobs are being created.
What’s obscured a clear view of the economy, of course, is October’s government shutdown. The nearly three-week disruption put hundreds of thousands of people out of work, made Americans more angry and anxious, and forced investors and businesspeople to hunker down until the standoff ended.
That’s why most of the upcoming data for October, like Friday’s normally crucial U.S. employment report, will be marked by asterisk. And even the first estimate of growth for the third quarter, which ended before the shutdown began, won’t be able to offer much clarity.
“We are going to need a couple of months because there is going to be so much noise in the data,” said Scott Anderson, chief economist of Bank of the West. “There are no signs of economic acceleration, but no signs of falling off the cliff, either.”
The October employment report and first read of third-quarter gross domestic product are the highlights on this week’s economic calendar. A smattering of reports from September that were delayed by the shutdown, such like consumer spending, are also on tap.
Slower job growth
In October, economists polled by MarketWatch predict the number of net jobs created will drop sightly from a preliminary gain of 148,000 in September. The stage for lowered expectations was set last week after giant payroll processor ADP reported a mediocre 130,000 increase in private-sector jobs last month.
How much of the expected dropoff would stem from the shutdown is uncertain. Government workers would still be considered employed under the so-called establishment survey used to determine net job creation.
Still, some companies may have delayed hiring until the outcome became clear, though economists think the impact was limited. More likely a smaller bump in hiring would reflect softer U.S. growth since the end of the summer.
“We shouldn’t expect a big reduction in payrolls because of the shutdown,” said Neil Dutta, head of economics at Renaissance Macro Research.
The bigger news is likely to be an uptick in the U.S. unemployment rate — to as much as 7.5% from 7.2% in September. Yet even such a spike has to be taken in stride because it could all be reversed in November.
Why? The unemployment rate is drawn from a separate survey of households that asks people whether they are working. As many as 800,000 federal employees were told to stay home during part or all of the shutdown and they could end up in the unemployment numbers despite getting backpay for time missed. Ditto for workers temporarily laid off by private companies that rely heavily on federal contracts. Read more on why unemployment rate is expected to rise.
Since most of those workers went back to work after the shutdown was over, November’s unemployment rate should fall.
The employment report will be released Friday morning.
A look back
Wall Street will also get its first look this week at how fast the U.S. expanded in the third quarter.
GDP is forecast to drop to 2.0% in the July-to-September period from 2.5% in the second quarter, according to the MarketWatch survey. A variety of economic indicators pointed to slowing growth well before the government shutdown.
Yet the GDP report, released Wednesday, may not provide much insight into how the fourth quarter is shaping up. The latest forecast is for 2.5% growth, but a lot depends on whether companies go back to business as usual after the shutdown.
Many economists think hiring, spending and investment decisions that were postponed in October will take place in November or December. Similarly, Americans who put off purchases because of the shutdown, mainly government workers, may spend as they normally do.
The rate at which consumers spent before the shutdown, meanwhile, will be unveiled on the same day as the October employment report. Consumer spending likely rose a modest 0.2% in September, with incomes rising a touch faster at 0.3%, the MarketWatch survey shows. http://www.marketwatch.com/story/cloud-hangs-...2013-11-03
