No October jobs report because of government shutdown

There will be no repeat of Labor Friday this week, as the record-long government shutdown has resulted in a lack of official data on the labor market and many other key indicators.

In the absence of critical data points, alternative data is the only game in town when it comes to measuring current conditions. In summary, various metrics show that the U.S. labor market is sluggish, with scattered signs of a sharp slowdown in hiring and an increase in layoffs.

there was Bureau of Labor Statistics Economists surveyed by Dow Jones say when it releases its monthly nonfarm payrolls report for October, it expects 60,000 job losses and the unemployment rate to rise to 4.5%.

Other data collected over the past few weeks reveals a broad mosaic of a weak, if not collapsing, labor market that policymakers are viewing with a cautious eye.

“We’re in an unusual environment, which is a low-hiring, low-layoff environment,” Austan Goolsbee, president of the Federal Reserve Bank of Chicago, told CNBC in an interview on Thursday. he said. “This characterizes periods of high uncertainty in which businesses retreat.”

Although the timing was a coincidence, the Chicago Fed announced its own decision in October. data indicators menu. An update Thursday showed the unemployment rate approaching 4.4%, still low by historical standards, with little change in layoffs and hiring rates.

But elsewhere there are signs of potential problems, if not a systematically weak labor market.

A look at alternative data

Here’s a quick look at a few other metrics that various data aggregators have recently published:

• Payroll processing company ADP reported earlier this week that companies added just 42,000 jobs in October; This number was better than expected, but still shows weakness in hiring.
• Job placement and consulting firm Challenger, Gray & Christmas reported 153,074 layoffs announced in October; This was the highest month in the last 22 years.
• Supply Production Institute published its report purchasing managers indices This week’s data for the manufacturing and services sectors show more companies plan to maintain or reduce staffing levels rather than adding workers. The employment index in ISM services was 48.2%, while manufacturing was 46%. While both are slightly higher on a month-on-month basis, any reading below 50% indicates contraction.
• Bank of America has also begun collecting its own employment data. The bank reported that annual payroll growth in October was 0.5%, unchanged from September. BofA data also showed significant disparity in wage growth; high-income earners saw a 3.7% year-over-year increase, while middle-income earners saw a 2% increase and low-income earners saw only a 1% increase. Overall, Bank of America said its data showed no “significant slowdown” in the job market.
• Job search site Indeed is closely followed size of open positions The end of October saw another decline, with the index falling to its lowest level since February 2021 last week.
• Workplace management site Homebase showed further declines in small business employment, with the “employees employed” indicator down 2.9% from January and hours worked down 2.9%.

Small businesses took a hit

Homebase data points to another trend, where large companies continue to add workers but small businesses largely step back.

“For 12 months the story has been about small business conservatism, and I don’t think that’s changing across the board,” Homebase CEO John Waldmann said in an interview. “Businesses prefer to have fewer people and have them work more hours. This is generally a conservative stance on how to run a small business.”

ADP figures show a steady erosion of employment by small firms. Businesses employing fewer than 250 people lost 34,000 workers in October. In the year, 133,000 workers were added to businesses with fewer than 50 employees, but most of those occurred in earlier months.

However, while there is little sign of growth, there is little indication of aggressive layoffs that would signal a broader economic downturn.

Although the Labor Department did not collect weekly unemployment claims data during the shutdown, state-level claims have been fairly steady.

Goldman Sachs estimates claims will total 228,000 last week, an increase of 9,000 but largely in line with recent trends.

“We’re showing a cooling labor market … but certainly not a collapsing labor market,” added David Tinsley, senior economist at the Bank of America Institute. “Some of this slowdown in employment growth that we’re seeing is being borne by small businesses in particular.”

For policymakers like Chicago Fed President Goolsbee, the data also points to a fairly stable employment picture.

The alternative data gives Fed officials at least an overview of the labor market as the government’s data blackout continues. But there isn’t much alternative information about inflation; That gives Goolsbee pause as he considers whether another rate cut would be appropriate, or even necessary, unless there is evidence of a deeper employment downturn.

“There’s a lot of stability in the job market. The unemployment rate is objectively low and the layoff rate is objectively low,” he said. “That would be very unusual for the beginning of a recession.”