The US Jobs Report: Unraveling the Impact of a Historic Shutdown
In a unique twist, the November jobs report is set to drop on a Tuesday in mid-December, a departure from its usual first-Friday-of-the-month slot. This anomaly is a direct result of the longest government shutdown in history, which has left its mark on the economic landscape.
A Muddled Picture?
Economists anticipate that the report will reveal a modest addition of 40,000 jobs last month, with the unemployment rate holding steady at 4.4%. While this rate is historically low, it still represents a slight increase from recent years.
The One-and-a-Half Jobs Reports
The Bureau of Labor Statistics (BLS) compiles its monthly labor market snapshot using two comprehensive surveys: one focused on businesses and the public sector, tracking payroll, wages, and hours; and another centered on households, capturing labor force status with detailed demographic information. This latter survey is conducted in collaboration with the US Census Bureau, which employs a variety of methods to collect raw data from households.
However, during the recent 43-day government shutdown, which lasted from October 1 to November 12, the major federal statistical agencies were effectively paralyzed. The vast majority of workers were furloughed, and the agencies suspended the collection, processing, and distribution of almost all data.
The Challenge of Recall
Daniel Zhao, chief economist at Glassdoor, highlights the difficulty of asking people to recall their activities from the past. He explains, "Their recall diminishes pretty quickly." As a result, the BLS has decided to focus on moving forward with the data collection, rather than attempting to reconstruct the past.
With no workers available to conduct household interviews during the survey week, the BLS announced that October's labor force data, including the unemployment rate, would not be available. Instead, the agency will include the electronically collected October data with the November jobs report.
A Placid Pace of Growth?
Zhao predicts a steady, albeit modest, jobs growth for the November report. However, he acknowledges the impact of the shutdown disruptions, which will become clearer on Tuesday. The BLS, known for its transparency, often includes box notes in its reports to provide important context and address technical matters.
Shutdown's Impact on Employment
Despite the furlough of over 700,000 federal workers during the shutdown, Bank of America economist Shruti Mishra does not expect a large negative number for October or a subsequent employment boom for November. Mishra explains that the establishment survey counts workers who were paid or expected to be paid during the reference week as employed, and the shutdown had a minimal impact on payrolls in 2013 and 2019.
Data Revisions and Collection Timeframes
Interestingly, Zhao suggests that the jobs data for both October and November could be more comprehensive and less subject to revision due to the extended submission and collection timeframes.
Filling in the Blanks
While Tuesday's report will provide a more partial view of the labor market than usual, recent weeks have seen a slew of private and public data releases that help fill in the gaps. For instance, 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.
The Bigger Picture
Beyond the headline payroll numbers and the November unemployment rate, economists emphasize the importance of delving into the details of last month's establishment and household surveys. These surveys offer a critical glimpse into the health of the US economy's backbone.
Industry-Specific Insights
Dean Baker, senior economist at the Center for Economic and Policy Research, highlights the significance of tracking job gains by industry. He anticipates employment declines in goods-related sectors while healthcare and potentially restaurants will continue to lead job growth.
Wage Growth and Consumer Spending
Economists expect wage growth to slow, which could further impact future consumer spending. Cory Stahle, economist at the Indeed Hiring Lab, emphasizes the importance of monitoring labor force participation rates, employment-to-population ratios, and unemployment data to understand how Americans are navigating the jobs market.
The Bottom Line
Stahle underscores the long-term impact of employment trends on the labor market. Even if job creation is steady, if the unemployment rate rises or people become discouraged and drop out of the labor force, it will eventually affect the overall health of the market.
And this is the part most people miss...
The November jobs report is more than just a snapshot of employment figures. It's a window into the resilience of the US economy in the face of unprecedented challenges. As we await the report's release, one question remains: Will the data reveal a resilient economy, or will it expose underlying vulnerabilities? What do you think? Share your thoughts in the comments below!
