Economy creates more jobs than expected in October

Economy

Jeff Cox
CNBC.com

21 minutes ago

Joe Raedle / Getty Images

Shutdown? What shutdown? The U.S. economy generated thousands of more jobs than expected last month, defying predictions that the 16-day government shutdown would slam hiring.

Forget the shutdown: Job creation surged in October despite dimmed expectations from the impasse in Washington.

There were a net 204,000 new jobs created for the month, though the unemployment rate rose to 7.3 percent. A separate measure that includes the underemployed and those who have quit looking also moved higher, from 13.6 percent to 13.8 percent.

The numbers easily topped economist expectations of 120,000 new nonfarm payroll jobs for the month, though it matched estimates for a slightly increase in the headline jobless rate.

"I find this bizarre," Moody's economist Mark Zandi told CNBC. "I wouldn't be surprised if this gets revised to some degree...down."

The data gave markets a jolt: Stock market futures that had indicated a higher opening turned lower, while interest rates spiked.

The numbers were expected to be noisy due in large part to the government shutdown and generally speaking have been on a modest downward trajectory lately. Heading into October, the economy was creating an average 185,000 jobs per month.

Softening in the data has tempered expectations for a change in Federal Reserve monetary policy. The central bank had been indicating earlier in the year that it might start pulling back on its $85 billion a month in bond purchases, but three meetings have gone by since taper talk began in May, with no changes.

This week, two teams of Fed economists presented papers suggesting that the unemployment rate probably should drop to 6 percent or 5.5 percent before increasing interest rates. The Fed's short-term target rate has remained near zero since the financial crisis.

—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.