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The Boston Globe

Business

Strong US job gains despite government shutdown

Maybe the government should shut down every month.

Despite worries that the latest political fiasco in Washington had hurt the economy, job growth jumped in October as US employers added more than 200,000 jobs, the Labor Department reported Friday. It was a performance that greatly exceeded most economists’ predictions, particularly in light of last month’s 16-day federal shutdown that many expected to add further drag to an already sluggish recovery.

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“We got caught with our pants down,” said Sung Won Sohn, a professor of economics at California State University and former chief economist at Wells Fargo & Co. of San Francisco. “This clearly indicates that the economy maybe has more momentum than we thought it had.”

The better-than-expected job gains represented the second time this week that the strength of the recovery caught analysts by surprise. Thursday, the Commerce Department reported the US economy grew at its fastest rate of the year during the three-month period from July to September.

The Labor Department, meanwhile, said Friday that the economy created more jobs — 60,000 more — in August and September than initially estimated. Stocks rallied on the report, with the Dow Jones industrial average surging 168 points to close at a record 15,762.

The employment picture, however, wasn’t all positive. Some of the largest job gains came in low-paying service industries. Leisure and hospitality, which includes hotel and restaurants, added 53,000 jobs in October, and employment among retailers rose by 44,000. The National Women’s Law Center, a Washington advocacy group, noted that 60 percent of women’s job gains in the four years since the recession ended four years ago have come in low-wage occupations, compared with 20 percent for men.

The national jobless rate also rose last month, to 7.3 percent from 7.2 in September. Economists said the figure may have been skewed by the government shutdown as some furloughed employees identified themselves as unemployed in the Labor Department’s survey.

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Still, long-term unemployment remains near record highs as more than 4 million Americans have looked for work unsuccessfully for six months or more. The unemployment rate also does not include workers who have given up job searches. When they are included, unemployment leaps to more than 10 percent.

Long-term unemployment has barely receded in the last year, said Nariman Behravesh, chief economist at IHS Global Insight of Lexington. “What today’s numbers point to is continued gradual improvement,” Behravesh said, “but too gradual for a lot of people’s liking.”

Among the dissatisfied are policy makers at the Federal Reserve. Despite last month’s job gains, Behravesh said he doesn’t expect the Fed to start scaling back its efforts to stimulate the economy this year. The Fed has held its benchmark short-term interest rates near zero since 2008. It also has purchased $85 billion a month in Treasury- and mortgage-backed securities since last year to drive down long-term interest rates and spur sales in interest sensitive industries, such as autos and real estate. “What the Fed has said is they’re looking for ‘substantial and sustained improvement in the job market,’ ” Behravesh said. “I would say today’s employment numbers were substantial, but the question they’re facing is whether this represents sustained improvement. And this point is not clear.”

Fed policy makers will probably wait until March to begin scaling back, or tapering, bond purchases, Behravesh said. In the interim, the November jobs report due out next month may show even stronger gains as the economy bounces back from the government shutdown.

In early October, about 850,000 federal workers were furloughed for at least part of the 16-day shutdown. The White House said this week that it would provide back pay for those furloughed workers at a cost of about $2.5 billion.

Sohn, the California State University economist, said the shutdown may have had less economic effect than predicted because government layoffs expected by some economists didn’t materialize. In addition, government workers, knowing that the shutdown was temporary, probably did not change their spending habits much.

Sohn said that was good news for the economy, which relies heavily on consumer spending, and for furloughed government employees, who got a paid vacation.

“But it’s too early to come to a conclusion that the economy is really healthy and growing,” he said. “Underneath, there are really a lot of problems.”

Megan Woolhouse can be reached at megan.woolhouse@globe.com.

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