Shutdown furloughs will warp jobs report and economic picture

November 8, 2013
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The monthly jobs reports from the Bureau of Labor Statistics normally serve as a gauge of U.S. economic health, but the 16-day government shutdown last month will skew that picture when October’s numbers are released Friday.

The shutdown forced hundreds of thousands of federal employees and contractors out of work while Congress and the White House worked on a deal to fund federal operations, which means temporary impacts that could create a mirage of worsening conditions.

Regardless of where the numbers stand on Friday, they won’t provide an accurate picture of the economy, since at least part of the data will be distorted by workers who had to stay home during the shutdown but soon returned to their jobs. Economists will have to wait for December or January — when jobs reports for the post-shutdown months are released — to see a true gauge of U.S. economic strength.

(Saul Loeb/AFP-Getty) - A jobs sign on the U.S. Chamber of Commerce building in D.C.
(Saul Loeb/AFP-Getty) – A jobs sign on the U.S. Chamber of Commerce building in D.C.

With the jobs data being warped by shutdown furloughs for the next month or two, the Federal Reserve may not have all the information it needs to determine whether its safe to pull back on its economic-stimulus efforts, which involve buying $85 billion worth of bonds every month in hopes of lowering interest rates and encouraging activity.

How exactly will furloughs affect the jobs numbers? That depends on which aspect of the report we’re talking about, since the figures come from two separate surveys.

MORE: How will shutdown furloughs affect the October jobs numbers? 

In brief, the unemployment data will reflect federal-worker furloughs, while the employment numbers will not. Here’s how that works:

The unemployment figures come from a survey of households that counts individuals as unemployed if they were furloughed during the reference week, which is Oct. 6-12 in this case. Federal employees employees are due to receive retroactive compensation for the shutdown period, but they will still be counted as jobless.

Employment numbers are different. They come from the employer survey, which classifies individuals as employed if they are paid or will eventually be compensated for any pay period that includes Oct. 12.

Outside of the BLS, a few other sources of reliable economic information can offer clues to the strength of the economy. One is the Federal Reserve Board, which said in a statement last week that the labor market has improved, but that the unemployment rate remains high.

MORE: Economy expands 2.8 percent in third quarter, but consumer spending slows

Another source is the University of Michigan’s monthly consumer-confidence index. The October number stood at 73.2, representing a drop of 4.3 points from to the previous month and 9.4 points compared to the same time last year.

Economists from several ratings agencies have estimated that the shutdown trimmed about a half percentage point off of fourth quarter growth.

Follow Josh Hicks on TwitterFacebook or Google+. Connect by e-mail at  josh.hicks@washpost.comVisit The Federal Eye, The Fed Page and Post Politics for more federal news. E-mail federalworker@washpost.com with news tips and other suggestions.

Josh Hicks covers the federal government and anchors the Federal Eye blog. He reported for newspapers in the Detroit and Seattle suburbs before joining the Post as a contributor to Glenn Kessler’s Fact Checker blog in 2011.
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