WASHINGTON (AFP) - The US economy added a surprise 204,000 jobs in October despite uncertainty over the government shutdown that analysts feared would discourage businesses from hiring, the Labor Department reported on Friday.
The figure was more than double what was expected, and coupled with revisions that added 60,000 net new jobs to the previous two months' numbers, painted a picture of an economy healthier than many believed.
The unemployment rate ticked up slightly to 7.3 per cent, in part due to the counting of some of the hundreds of thousands of federal workers laid off temporarily during the October 1-16 shutdown.
Without those numbers, the jobless rate likely would have fallen.
Yet, at the same time, the October data showed a huge surge in the number of people who have dropped out of the jobs market completely, by more than 900,000, only part of which could be explained by the shutdown.
It took the participation rate in the jobs market to 62.8 per cent, the lowest level in 35 years, suggesting it is too early to write a clean bill of health for the economy.
Coming on the heels of a surprisingly strong initial estimate of economic growth in the third quarter of 2.8 per cent, the jobs data was nevertheless firm enough that economists said the Federal Reserve could be provoked into cutting back its stimulus as early as December.
"The Fed now has one more payroll report before its December meeting; clearly, another report like this one will greatly increase the odds of tapering at that meeting," said Mr Ian Shepherdson of Pantheon Macroeconomics.
"Strong payroll gains put December tapering on the agenda again," said Mr Harm Bandholz of UniCredit.
The additional jobs all came from the private sector, as government authorities cut a net 8,000 positions.
The strongest gains were in the leisure and hospitality sector, which added 53,000 jobs; retail trade, which added more than 44,000 positions; and professional and business services, another 44,000.
Construction and manufacturing together added 30,000 jobs. The White House cheered the data while warning that the economy was still scarred by the shutdown.
"We added about 200,000 new jobs last month, but there's no question that the shutdown harmed our jobs market," President Barack Obama said in a New Orleans speech.
"The unemployment rate still ticked up. And we don't yet know all the data for this final quarter of the year, but it could be down because of what happened." The Alliance for American Manufacturing, frequently a critic of the Obama administration, was positive about the October numbers.
"Now we have a jobs report that we can cheer about, despite all the chaos in Washington last month. Manufacturing jobs grew at a healthy clip, and it's about time," said Mr Scott Paul, AAM president.
The diverging pictures of strong jobs creation and yet a deteriorating employment situation stem from the data coming from two separate surveys.
Job creation is based on a survey of establishments, while unemployment is based on a household survey where the data is more frequently inconsistent from month to month.
The upside surprise in job creation, said University of Michigan economist Justin Wolfers, likely reflects the fact that, due to shutdown delays, the Labor Department spent one extra week to collect data from employers: it had more responses and thus higher new jobs numbers.
On the other hand, the household data was skewed by the temporary government layoffs, the Labor Department admitted.
While many were counted as unemployed, the number of officially unemployed Americans was only slightly higher at 11.27 million. At the same time, the surge in dropouts from the labor market was double the number of federal employees out of work for the full 16-day shutdown.
Mr Wolfers said the distortions in October are too great to reach any conclusion about the jobs market.
"Depending on what signals you emphasize, it's reasonable to conclude anything - from a moderately weak to a moderately strong jobs picture," said Mr Wolfers.
"My advice to Federal Reserve policy makers considering pulling back on stimulative bond purchases is simpler: Do nothing. Ignore this report. Sit on your hands. Wait for the November data." Market interpretations were equally divergent. Bonds fell on expectations of an early taper, with the 10-year Treasury yield rising 0.13 percentage point to 2.75 percent.
But stocks gained, the S&P 500 index climbing more than 1.0 percent by mid-afternoon.