New jobs figures are out Friday for the month of October, aka the month of the Great Government Shutdown Fortnight (+ two days). The good news? The United States economy gained 204,000 jobs. The bad news? Well, that that's all the good news. As much as we can tell anyway, because the government shutdown sort of screwed up October's numbers. That said, it appears that first-time jobless claims were up by the highest rate since Hurricane Sandy; and the unemployment rate hit 7.3 percent. Which is not great news.
But like we said in our report of August's equally high unemployment rate, as a measurement tool, unemployment is like the BMI of economics: great for a cursory evaluation of health, but it ignores key variables.The best way to get an idea of the economy's health is to check out the labor force participation rate (LFPR). The LFPR shows how many working-age people in the economy are either employed or looking for a job. The LFPR also explains why both the number of jobs added and the unemployment rate can both go up at the same time. If there are a bunch of workers who, all of a sudden, enter the potential work force, but only some become employed, that's bad news.
Usually, the LFPR is between 67 and 68 percent. In October, however, we were looking at a rate of 62 percent — meaning that 38 percent of the potential labor force (38!!) was unemployed and had give up looking for a job (the LFPR excludes students, homemakers, and those lucky bastards under 64 who are retired). It's the lowest rate in 130 months (although it's been below 64 percent since the beginning of the year).
But because of the shutdown, the numbers are funky. Unemployed government workers affected by the shutdown could be showing up on the 'jobless' side of things, or 'employed.' Furthermore, the LFPR could be a skewed due to furloughed employees who were laid off and available to work (i.e. in the labor pool), but who decided not to look for work knowing they'd have a job again once the shutdown ended. Because we won't have the numbers for post-shutdown November until December, how many workers that accounts for is a little unclear.
But here's why we shouldn't (probably) worry about the job numbers this month. And yes, it has everything to do with the shutdown. Capital Economics' Paul Ashworth explains:
Apparently, the near three-week Federal government shutdown had little, if any, impact on payrolls. Manufacturing increased by a healthy 19,000, construction increased by 11,000 and retail increased by 44,000. Federal employment fell by a modest 12,000, because those workers affected by the shutdown received their back pay when they returned, which means they were counted as employed in the establishment survey.
OK Wall Street, back away from the ledge...