No Payrolls, but still plenty to stew over in the jobs market

Summary

Delayed economic data due to the federal government shutdown comes at a particularly ill-opportune time for the U.S. labor market. As we have highlighted for months, the jobs market is in a precarious place. The unemployment rate has moved up to the top end of estimates of "full employment." Although the climb has been gradual this year, it comes amid a sharp drop in labor force participation and a near-stalling in job growth. Reluctance among companies to add headcount is evident across an array of public and private data on hiring, but so too is their reticence to lay off workers. Thus, while the jobs market is not unraveling, it continues to teeter on a knife's edge. Strengthening in end-demand could unleash pent-up demand for workers, but a further moderation or negative shock to growth could tip the scales the other direction, setting off a negative feedback loop between income, spending and hiring.

So when it comes to the labor market, what's keeping our guard up and making us nervous about flying partially blind in the days, and potentially weeks, ahead? The chartbook that follows highlights the indicators we watch to gauge the labor market's underlying momentum and vulnerability.

A sidebar on the shutdown

The federal government shutdown will delay the September Employment Situation report, originally slated to be released by the Bureau of Labor Statistics on October 3. The reference period of the report spanned September 7-13, so the furloughing of BLS workers should not impact data collection but rather the final steps in processing. Following the 2013 shutdown, the September jobs report was released Tuesday, October 22, four businesses days after the federal government resumed operations. The publishing time could be a touch sooner after re-opening this go round, with the shutdown occurring a day closer to the originally scheduled publication, but the timeline will depend on the ultimate duration of the shutdown.

Come the release of the October Employment Situation (currently scheduled for November 7), the shutdown should not have a direct bearing on nonfarm payrolls. Even though furloughed workers do not receive pay during a shutdown, Congress passed a law in 2019 guaranteeing back pay. As such, federal government workers are still counted in the establishment survey's measure of payrolls. The unemployment rate, however, would be pushed higher if the shutdown lasts all the way through October 17 (the end of the reference week), since the ~750K furloughed workers would be classified as "unemployed on temporary layoff."¹ If the current shutdown becomes prolonged, the October report would also likely be delayed, as it was by one week in 2013. This lack of government data for the time being means more scrutiny of private sector data, most of which also paints a tenuous picture of the labor market.

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