How the government shutdown affected the U.S. labor market

Updated Fri, Feb 1, 2019, 8:07 AM

Spanning 35 days, the recent U.S. partial government shutdown was the longest shutdown in history. And it had a material impact on the labor market.

January’s jobs report released by the Bureau of Labor Statistics (BLS) on Friday morning did not disappoint. The U.S. economy added a cool 304,000 jobs in January, crushing analysts’ expectations of 165,000.

While the number of non-farm payrolls — which is deduced from a survey of establishments — was not significantly distorted by the shutdown, that’s not to say that the government shutdown had no material effect at all. Here are the two big ways the showdown affected January’s jobs report.

First, the BLS said that the unemployment rate — which is computed using information gathered from a survey of household — ticked up to 4.0% from 3.9% in December due to the shutdown.

“The impact of the partial federal government shutdown contributed to the uptick in these measures,” the BLS said in a statement. “Among the unemployed, the number who reported being on temporary layoff increased by 175,000. This figure includes furloughed federal employees who were classified as unemployed on temporary layoff under the definitions used in the household survey.”

Second, the number of people employed part time for economic reasons, also referred to as involuntary part-time workers, rose by about 500,000 during January.

“Nearly all of this increase occurred in the private sector and may reflect the impact of the partial federal government shutdown. (Persons employed part time for economic reasons would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs),” the BLS said. The U-6 unemployment, aka the underemployment rate, captures these folks and the number jumped to 8.1% in January from 7.6% a month ago.”

“These increases should revert lower next month,” TD Securities’ economist Michael Hansen said.

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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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