In a sign of how the government shutdown has created great uncertainty around the economy’s performance in October, economists have an unusually large spread on the forecasts for Friday’s nonfarm payroll number.
The median forecast of the 33 economists surveyed by Dow Jones Newswires and the Wall Street Journal calls for a mediocre gain of 120,000 jobs added in October. But the projections range from a low 75,000 to a robust 175,000. In the four months before October, the forecast spread averaged just 56,000.
Large spreads in the payrolls forecasts usually show up when an unexpected event hits the economy. For instance, the lowest and highest forecasts for the November 2012 payrolls number varied by a large 120,000 jobs because of the unknown impact from Superstorm Sandy.
For October, the uncertainty stems from the 16-day shutdown. According to the Labor Department’s definitions, the 700,000 or so government workers furloughed during the shutdown would still be counted as employment since they will receive back pay.
However, the economists at JP Morgan who are in the low-hiring camp say the shutdown probably affected indirectly about 30,000 private-sector workers, including government contractors. The JPM forecasters also expect state and local government payrolls to decline following two months of very strong job gains.
Steven Ricchiutto, chief economist at Mizuho Securities, expects a 175,000 job gain for October. He says his strong job number is based on weekly filings for jobless benefits.