WASHINGTON — The 16-day government shutdown didn’t seem to hurt the economy after all.
U.S. employers added a surprisingly strong 204,000 jobs in October, the Labor Department said Friday. And they added far more jobs in August and September than previously thought.
Activity at service companies and factories also accelerated last month in the midst of the shutdown.
All of which suggests the U.S. economy may be sturdier than many analysts had assumed.
The unemployment rate rose to 7.3 percent from 7.2 percent in September, the Labor Department said. But that was probably because furloughed federal workers were temporarily counted as unemployed.
“The economy weathered the government shutdown surprisingly well,” said Ted Wieseman, an economist at Morgan Stanley. “Businesses looked through the shutdown, remained confident in the growth outlook and kept hiring.”
One weak link in the economy recently has been consumers, who spent cautiously over the summer, holding back growth. But the solid job gains in recent months, combined with modest increases in hourly pay, could encourage more spending.
Other trends have raised hopes that the economy will remain healthy in coming months: Growing demand for homes should support construction. And auto sales are likely to stay strong because many Americans are buying cars after putting off big purchases since the recession struck nearly six years ago.
Job growth is a major factor for the Federal Reserve in deciding when to reduce its economic stimulus. The Fed has been buying bonds to keep long-term interest rates low and encourage borrowing and spending.
For some employers outside the Beltway, the government shutdown scarcely mattered.
Bob Duncan, founder and chief executive of Dallas-based American Leather, said his company is on track for a third straight year of steady revenue gains. American Leather custom-builds sofas, recliners and other furniture for Crate and Barrel and many smaller chains.
Duncan has boosted his 400-member workforce by about 2 percent in the past three months.
“I think everyone’s kind of numb to it,” Duncan said, referring to the budget battles in Washington.
More important to Duncan has been a spate of remodeling by hotel chains, many of which had postponed upgrades until recently.
Economists differed about how October’s robust jobs report might influence the Fed. Some said it probably isn’t sufficient for the Fed to slow its $85-billion-a-month bond-buying program when it meets Dec. 17-18.
“The one month of job growth is not enough to allow them to pull the trigger,” said Patrick O’Keefe, director of economic research at CohnReznick.
But Paul Ashworth, chief U.S. economist at Capital Economics, disagreed, writing in a research note: “In our opinion, the data would justify the Fed reducing the pace of its asset purchases in December.”
The report showed that employers added an average of 202,000 jobs per month from August through October — up sharply from an average of 146,000 from May through July. And they added 45,000 more jobs in August and 15,000 more in September than the government had previously estimated.
Private businesses added 212,000 jobs last month. That was the most since February. By contrast, federal government jobs fell by 12,000.
Some consumers may spend more as the effect of tax increases that kicked in at the start of the year diminishes. In addition, banks are returning to health and may soon lend more freely. Even Europe is slowly recovering, and growth in Japan has picked up, which could boost U.S. exports.
Some companies expect a healthy holiday shopping season and are staffing up accordingly. UPS is filling 55,000 temporary jobs for the holidays.
One troubling detail in the report: The percentage of Americans working or looking for work fell to a 35-year low. But that figure was probably distorted by the shutdown.
About 800,000 government workers were furloughed for all or part of the Oct. 1-16 shutdown. Many were counted as unemployed for the purposes of calculating the unemployment rate.
But because they were ultimately paid for their time off, the furloughed workers were still counted as employed by a separate government survey that calculates job growth.
Manufacturers added 19,000 jobs in October, the most since February. Construction companies gained 11,000 jobs; retailers, 44,400; and hotels, restaurants and entertainment businesses, 53,000.
Economic growth accelerated in the July-September quarter to an annual rate of 2.8 percent, the government said Thursday. That was up from a 2.5 percent annual rate in the April-June quarter.
Some economists forecast growth will remain above 2 percent in the final three months of the year and then improve in 2014.
Paul Wiseman of the AP contributed to this report.
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