What this week’s jobs data could reveal about the US economy

Economic

Summary:

This week’s delayed jobs report, distorted by the government shutdown, may show weak or mixed job growth, offering murky but crucial clues on labor-market cooling, wages, and economic momentum.

The November jobs report is landing at an odd time – on a Tuesday in mid-December, instead of (what’s usually) the first Friday of the month – due to the lingering impact of the historically long government shutdown.

The 43-day federal funding lapse resulted in a flash-freeze of crucial economic data at a critical juncture for American businesses and households.

The slow, steady thaw of deferred data over the past month, is building more into a deluge this week: In the next three days, major reports on retail sales, inflation and the labor market will be released.

And the latter two come with a bit of a holiday bonus: The jobs report and the Consumer Price Index release for November both will be packaged with roughly half of October’s data.

If it wasn’t so unprecedented, it would be quite fitting in a season filled with buy-one-get-one-50%-off deals.

Tuesday morning’s jobs report is expected to show that just 40,000 jobs were added last month and the unemployment rate held steady at 4.4% – historically low but still higher than in recent years.

Still, economists say the report could be more than a little muddled this time around.

“These government shutdowns don’t come around very often, and so there’s always a little bit of uncertainty when you have an operation as large as what the [Bureau of Labor Statistics] does for the jobs report,” said Daniel Zhao, chief economist at Glassdoor. “So, I think it bears being humble going into the report and being prepared for anything.”

Why one and a half jobs reports?

The BLS’ monthly snapshot of the labor market is generated from two robust surveys: One of businesses and public sector entities (tracking payroll, wages and hours) and the other of households (tracking labor force status with demographic detail). The latter survey is conducted in partnership with the US Census Bureau, whose workers interview households and collect the raw data from in-person visits, phone calls, emails and online.

However, the major federal statistical agencies effectively went dark during the shutdown that lasted from October 1 to November 12. The vast majority of workers were furloughed, and the agencies themselves suspended the collection, processing and distribution of practically all data.

“In practice, it’s surprisingly hard to ask people what they were doing in the past,” Zhao said. “Their recall diminishes pretty quickly. And so, instead, it’s reasonable just to start looking at the data moving forward.”

With no workers able to conduct the household interviews during the survey week, the BLS later announced that October labor force data – including the unemployment rate – would not be available and the agency would not release a separate jobs report for that month. Instead, October data collected electronically would be included with the November jobs report.

For November, the collection period for both surveys was extended, and extra processing time was afforded, BLS said. As a result, the November jobs report was pushed back from December 5 to December 16.

The asterisks

“I think there’s a placid pace of jobs growth that seems most likely for the report,” Zhao said. “There is, of course, a big asterisk on that.”

That’s because the impact of the shutdown disruptions should become much clearer on Tuesday: The BLS, which has robust transparency practices, inserts box notes into reports when important context or technical matters warrant.

While more than 700,000 federal workers were furloughed during the 43-day shutdown, a large negative number for October and a subsequent employment boom for November is not expected, Bank of America economist Shruti Mishra wrote in a recent note to investors.

“The establishment survey counts workers who were paid/expect to be paid for any part of the reference week as employed,” she wrote. “Indeed, the shutdown had a minimal impact on payrolls in 2013 and 2019.”

If anything, it’s possible that the jobs data for both October and November could be fuller and less subject to revision because of the longer submission and collection time frames, Zhao said.

September, a ‘high-water’ mark

While Tuesday’s report will have a more-partial-than-typical picture of the labor market, a slew of private and public data released in recent weeks has helped fill in the blanks.

Payroll giant ADP’s monthly private-sector employment reports estimated a net gain of 47,000 jobs for October and a net loss of 32,000 jobs for November.

Weekly unemployment claims, which are watched closely as a proxy for layoff activity, have largely held steady (minus distortions caused by the Thanksgiving holiday week).

Also, new BLS data released last week showed that although job openings increased in October, hiring continued to stall, layoff activity picked up, and employees clung to their jobs with white knuckles.

“I think the September jobs number was probably a high-water mark for what we’re going to see in the more recent data,” said Tyler Schipper, an associate professor of economics at the University of St. Thomas in St. Paul, Minnesota. “I think my estimation is somewhere between 0 and 50,000 jobs between the two reports. One of them might end up being negative and one of them might end up being positive.”

“But I don’t expect a change from this stalemate where we’re not creating enough jobs to keep the unemployment rate down,” he added.

The DOGE drop-off

Still, even before the shutdown, the October jobs report was projected to show weak, if not negative, employment growth.

Between 100,000 and 150,000 federal workers were expected to drop off the payrolls on October 1, after accepting the “fork in the road” paid leave buyout offers put forth months earlier by the Trump administration’s Department of Government Efficiency initiative.

That’s roughly 5% of overall federal employment and a sliver of overall employment, but the bulk decrease will distort October’s payroll estimates.

It’s possible that October could show a net loss of 65,000 jobs, Mishra wrote, pegging a loss of 120,000 jobs in the public sector and a 55,000-job gain in the private sector.

That would be a steep downturn from the higher-than-expected employment growth of 119,000 jobs in September, a figure that Mishra said could be revised lower.

What else to look for in Tuesday’s report

Beyond the headline payroll numbers and the November unemployment rate, the innards of last month’s establishment and household surveys could provide an even more critical look at how the backbone of the US economy is faring, economists say.

The industry-specific breakdown of job gains will be important to watch, noted Dean Baker, senior economist at the Center for Economic and Policy Research.

He expects goods-related sectors to see employment fall again while health care and potentially restaurants will continue to lead job gains.

Wage growth is expected to slow, which could further put pressure on future consumer spending.

Trajectory of labor force participation rates, employment to population ratios and unemployment data will be important guideposts to how Americans are experiencing the jobs market, said Cory Stahle, economist at the Indeed Hiring Lab.

“At the end of the day, if you’re making 100,000 jobs a month but … the unemployment rate is going up or people are saying, ‘I just can’t find anything; I’m not going to participate and look for a job anymore,’” that will eventually catch up to the labor market, Stahle said.

Source: cnn

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What this week’s jobs data could reveal about the US economy

Source: cnn

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