With U.S. Bureau of Labor Statistics employees furloughed due to the federal government shutdown, the agency’s website shows a release from Wednesday as its most recent data update instead of the monthly employment report for September that had been scheduled for Friday.
But analysts and central bank watchers are churning through their own models and data sources to get what insight they can about the state of hiring and firing across the U.S. economy.
The jobs report is critical to U.S. Federal Reserve decisionmaking, and central bankers aren’t completely blind. Coincidental to the government shutdown, the Chicago Fed began releasing its own unofficial estimate of the national unemployment rate, relying partly on private “real-time” data, and said it remained roughly steady last month at 4.3%.
Goldman Sachs, using state unemployment claims still being reported to the Department of Labor and posted to a public database, estimated seasonally adjusted new claims for unemployment benefits ticked up slightly to 224,000 for the week ending September 27, while the estimate for those on benefits rolls beyond one week fell slightly the week earlier. Neither is a signal of decaying labor market conditions.
Closely watched data from the private Institute for Supply Management on Friday showed U.S. services sector activity stalled in September. The survey’s gauge of employment in the sector inched higher but remained mired in contraction territory for a fourth straight month as companies remained reluctant to backfill open positions while also finding it hard to find qualified applicants.
Between private sector data, surveys the Fed generates on its own, and other sources, “we have enough information to do our job,” Federal Vice Chair Philip Jefferson said on Friday in Philadelphia. “My expectation is that I’ll be well informed before I go into the October meeting.”
But the longer the federal government remains idle, the more policymakers and markets may be driven by the best guesses of analysts who all have their own ways to parse the information at hand.
A Lean Towards Bending But Not Breaking
This moment is important for the Fed because officials are worried that, if history holds, the recent slow increase in the unemployment rate could accelerate into a jobs crisis. Trying to avoid that is why Fed officials cut interest rates at their last meeting.
Deciding whether another quarter-percentage-point cut is appropriate at the October 28-29 meeting hinges in part on whether the unemployment rate is holding steady or showing evidence of a faster increase. Complicating the analysis is the influence tougher immigration enforcement is having on the labor force. With fewer foreign-born workers, the workforce is smaller than it would be otherwise, and fewer additional jobs are needed each month to keep the unemployment rate steady.
Michael Pearce, deputy chief U.S. economist for Oxford Economics, combed through private data like the job declines registered by payroll processor ADP for September and a drop in layoffs seen by staffing firm Challenger, Gray and Christmas, and coupled that with internal models of workers flowing into and out of jobs. He saw no dramatic change in the job market between September and August.
“What is clear is that labor market conditions are still characterized by a no-hire, no-fire” environment, he wrote.
The Fed has been wrestling with that for months, with some policymakers seeing it as a sign of resilience and others as a crack that could turn into a rupture.
Comerica Bank Chief Economist Bill Adams agreed the economy remained “in a low-hire, low-fire, low-gear mode,” but with risks.
“Layoffs continue to run quite low. Employers are reluctant to let go of workers after struggling to staff up during the post-pandemic recovery,” he wrote, noting that a Cleveland Fed staff model based on a sample of layoff WARN notices was down 22% in August compared to the year before.
Yet at the same time, “hiring intentions are down by even more,” he said, with the U.S. “at best adding jobs well below trend, and perhaps shedding them.”
Francesco Renna, an economist with Chmura Economics & Analytics, said that postings to the companies JobsEQ site were down 10% from August to September.
“Hiring has slowed enough to make it harder for the unemployed to re-enter the workforce,” he said, but with layoffs also contained “we do not expect the September unemployment rate to rise significantly.”
Less Data at the Margins
The headline unemployment rate may be the key statistic Fed officials are monitoring right now.
But in recent weeks, policymakers have been looking at some of the more granular details for possible “tells” about the direction of things.
Average hourly earnings, for example, are an important barometer of the balance between supply and demand for workers. Wages rise faster in a tight job market, raising inflation fears, while wage growth slows when supply outstrips demand.
Daniel Zhao, chief economist with jobs and recruiting site GlassDoor, said the firm’s data showed salaries slipped 0.4% from August to September, while the year-over-year rate of growth dropped from 5.4% to 4.9%, the slowest pace since April. Fewer job candidates were rejecting offers, which “suggests that more workers are settling for job offers they may not have accepted just a year ago” – consistent with a weaker overall job market.
Other closely watched margins may have to wait for the BLS to turn the lights back on. Fed Chair Jerome Powell and other policymakers noted a recent rise in the Black unemployment rate, lengthening spells of unemployment, and a drop in average hours worked each week, trends that could point to job troubles ahead.
That kind of detail is why Fed officials still refer to the BLS report as the gold standard for policy-relevant information, something they lack at least for now.
(Reporting by Howard Scheider; Editing by Andrea Ricci)
