Companies added fewer workers than projected in October, indicating the U.S. job market lost momentum amid budget strife in Washington, a private report based on payrolls showed today.

The 130,000 increase in employment was the smallest in six months and followed a revised 145,000 gain in September that was weaker than initially estimated, according to the ADP Research Institute in Roseland, New Jersey. The median forecast of 39 economists surveyed by Bloomberg called for an advance of 150,000 jobs.

The monthly figures are the first to show how employment fared during a 16-day partial federal shutdown that started Oct. 1 and resulted in the furlough of some contractors and other workers. Federal Reserve policy makers meeting today are watching job-market progress as they debate when to scale back record monetary stimulus.

“Obviously, there was some impact of the government shutdown,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, and the best forecaster of the ADP figures in the last two years, according to data compiled by Bloomberg. The Fed has “been very clear that the tapering decision is going to remain data dependent, and this suggests it's still not quite strong enough.”

Stock-index futures held gains after the figures, signaling equities will extend a four-day rally that has driven the Standard & Poor's 500 Index to a record. The contract on the S&P 500 expiring in December rose 0.2 percent to 1,770.3 at 8:46 a.m. in New York.

A report from the Labor Department showed the cost of living rose as projected in September as fuel charges picked up, capping the smallest year-to-year gain in five months. The consumer-price index increased 0.2 percent after a 0.1 percent gain the prior month. The CPI climbed 1.2 percent in the 12 months through September, the smallest gain since April.

Estimates in the Bloomberg survey for ADP employment ranged from gains of 70,000 to 177,000 after a previously reported increase of 166,000 in September.

Manufacturers, builders and other goods-producing industries increased headcount by 24,000. Employment in construction climbed by 14,000, while factories added 5,000 jobs, today's report showed. Trade, transportation and utility companies added 40,000 jobs.

Payrolls at service providers rose by 107,000 in October.

Company Size

Companies employing 500 or more workers added 81,000 jobs. Medium-sized businesses, with 50 to 499 employees, took on 13,000 workers and small companies expanded payrolls by 37,000.

“The government shutdown and debt limit brinksmanship hurt the already softening job market,” Mark Zandi, chief economist at Moody's Analytics Inc. in West Chester, Pennsylvania, said in a statement. Moody's produces the figures with ADP. “Any further weakening would signal rising unemployment.”

The shutdown closed national parks, halted some services, and resulted in some furloughs by government contractors. The closing resulted in at least $24 billion of lost economic output, according to Standard & Poor's. President Barack Obama's chief economic adviser said last week that it cost the U.S. 120,000 jobs in October.

In addition to layoffs at private companies with government ties, the shutdown may have slowed hiring. McDonald's Corp. Chief Executive Officer Don Thompson said on an Oct. 21 earnings call that closing E-Verify, a federal program to determine employment eligibility, affected the hiring process.

“It's fairly minimal at this point relative to what's taking place from a government perspective,” said Thompson, head of the world's largest restaurant chain based in Oak Brook, Illinois.

At the same time, some companies have been desensitized by Washington politics and are keeping focused on the outlook for demand.

“As a nation, we've grown a little bit accustomed to the fact that we have a bunch of folks in our nation's capital that a high percentage of the time” play politics, Daniel Florness, chief financial officer of Fastenal Co., a Winona, Minnesota-based provider of industrial and construction supplies such as screws and bolts, said on an Oct. 9 earnings call.

“If there's core demand for the things that we sell, that core demand will be there. I don't think that distraction is going to be that destructive longer term, but we don't know,” he said.

Figures yesterday showed Americans were still spending in the month before the government shutdown. Retail sales excluding autos rose 0.4 percent in September following a 0.1 percent gain a month earlier, the Commerce Department said yesterday.

First Half

While companies have started announcing their hiring plans for the holiday-shopping season, employment gains have slowed so far in the second half of the year. Companies added 129,000 workers on average from July through September, less than an average increase of 201,000 in the first six months of the year, according to Labor Department data.

The agency will release its monthly report for October on Nov. 8, a week later than initially scheduled because of the government shutdown.

Amazon.com Inc. the world's largest e-commerce company, will hire 70,000 full-time seasonal workers in the U.S. to meet order demand, a 40 percent increase over last year, the Seattle-based company said Oct. 1.

“We're getting ready for an exciting holiday season and that includes having to making sure that we have the right amount of employees, as well as seasonal help, during that period,” said Thomas Szkutak, Amazon's chief financial officer, during an Oct. 24 earnings call.

Wal-Mart Stores Inc., the world's largest retailer, is hiring 55,000 seasonal employees, an increase of 10 percent from 2012. The company also will move 35,000 workers to full-time status from part-time, and another 35,000 to part-time from temporary. Macy's Inc., the largest U.S. department store chain, said it plans on making 83,000 holiday hires, about 3,000 more than last year.

The government shutdown will make it difficult for Fed policy makers, who conclude a two-day meeting today, to gauge the progress of the labor market in determining when they should dial back $85 billion in monthly asset purchases.

ADP in October 2012 changed the method it uses to calculate its employment figures dating back to 2001. The report is now derived from a larger sample, and is released jointly with Moody's Analytics.

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Companies Add Fewer Workers than Expected in October

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