Shutdown means missed jobs report Friday. What it probably would have shown

Jobs Friday won’t be happening again this week as the record-long government shutdown has resulted in a lack of official data on the labor market as well as a host of other important indicators.

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

Had the Bureau of Labor Statistics released its monthly nonfarm payrolls report for October, economists surveyed by Dow Jones expect it would have shown a decline of 60,000 jobs and an unemployment rate increase to 4.5%.

Other data points collected over the past several weeks paint a broad mosaic of a weak, though not collapsing, labor market that policymakers are viewing with a wary eye.

“We’re in an unusual environment, which is this low hiring, low firing, environment,” Austan Goolsbee, president of the Federal Reserve Bank of Chicago, told CNBC in a Thursday interview. “That characterizes periods of high uncertainty, when businesses have pulled back.”

Though the timing was a coincidence, the Chicago Fed in October unveiled its own menu of data indicators. An update Thursday showed little change in the unemployment rate, edging toward 4.4%, still a low number by historical standards, as well as layoffs and the hiring rate.

Elsewhere, though, there are signs of potential trouble, though not of a systemically weak labor market.

A look at alt data

Here’s a quick glimpse at a handful of other metrics various data collectors have released recently:

• Payrolls processing firm ADP reported earlier this week that companies added just 42,000 jobs in October, a number that was better than expected but still demonstrated anemic hiring.
• Outplacement and consulting firm Challenger, Gray & Christmas reported 153,074 announced job cuts in October, the highest level for the month in 22 years.
• The Institute for Supply Manufacturing released its purchasing managers indexes for the manufacturing and services sectors this week, both indicating that more companies plan on holding staffing levels or cutting rather than adding workers. The employment index for ISM services was 48.2% while manufacturing came in at 46%. Though both were slightly higher on the month, any reading below 50% indicates contraction.
• Bank of America also has begun collecting its own employment data. The bank reported year over year payroll growth of 0.5% in October, unchanged from September. BofA data also showed a significant disparity in wage growth, with higher earners seeing year-over-year gains of 3.7%, middle earners at 2% but lower income rising only 1%. Overall, Bank of America said its data showed “no significant slowdown” for the labor market.
• Job search site Indeed’s closely-watched measure of job openings saw a further decline as October ended, with its index slipping further last week to its lowest level since February 2021.
• Workplace management site Homebase indicated a further decline in small business employment, with its “employees working” indicator down 2.9% from its January level and hours worked off 2.9%.

Small businesses hit

The Homebase data points to another trend, in which larger firms are continuing to add workers but smaller businesses have largely bowed out.

“The story now for 12 months has been one of small business conservatism, and I don’t think that’s changed in aggregate,” Homebase CEO John Waldmann said in an interview. “Businesses are choosing to have fewer people and have them work more hours. That generally is a conservative stance in how to operate a small business.”

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The ADP numbers have showed a steady erosion in employment for smaller firms. Businesses employing fewer than 250 people lost 34,000 workers in October. On the year, businesses with fewer than 50 workers have added 133,000 workers, but most of that came in earlier months.

However, while there’s only scant signs of growth, there are also few indicators of the aggressive layoffs that would signal a broader economic downturn.

Though the Labor Department isn’t aggregating weekly jobless claims data during the shutdown, state-level filings show a fairly steady pattern.

Goldman Sachs estimates that claims would have totaled 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 cool down we’ve seen in jobs growth is being borne particularly by small businesses.”

For policymakers like Goolsbee, the Chicago Fed president, the data also is suggestive of a fairly stable jobs picture.

Alternative data is giving Fed officials at least a general look at the labor market while the government data blackout continues. However, there’s not as much alt information on inflation, which is giving Goolsbee pause as he considers whether another interest rate cut would be appropriate or even necessary barring evidence of a deeper labor downturn.

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

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