With the federal government shutdown that began on October 1st ongoing, economic data releases from a plethora of federal agencies have ground to a halt. This also includes the jobs report issued by the Bureau of Labor Statistics. Despite the lack of official government data, several private sources that collect labor market data have produced their own jobs reports to partially fill the gap left by the shutdown.
ADP and Revelio Labs both produced employment reports based on private data. However, they reached diametrically opposite estimates. ADP found that the private sector lost 32,000 jobs. Only the education and healthcare sectors added a meaningful number of jobs according to the study, with 33,000 gained in September. Additionally, only very large employers (500+ employees) added jobs (33,000), while smaller employers (>50 employees) lost 40,000 jobs.Â
Revelio Labs’ employment report found that the economy added 60,000 jobs, with large increases in the healthcare and retail sectors. Revelio Labs derives its figures from online professional profiles from websites like LinkedIn, making it less reliable compared to ADP, which uses private payroll data. LinkedIn also produces a monthly jobs report based on its own data, which showed a notable slowdown in hiring for the month of September.
The outplacement firm Challenger produces a monthly job cuts report that also includes information on future company hiring plans. In September, employers announced around 54,000 job cuts, a decline of 26% compared to September of last year. However, job growth this year has been at its lowest level since 2009, due to a drop in seasonal hiring plans for the upcoming holiday season, adding more credence to the argument that the labor market is slowing down.
However, not all are convinced that the slowdown in hiring is a cause for concern. A recent blog from the Dallas Federal Reserve Bank and a research blog from the Royal Bank of Canada (RBC) have put forth the argument that the break-even employment growth rate – the number of jobs required to keep the unemployment rate stable – has declined. Both studies claim that partly due to the Trump administration’s hardline immigration policies, the labor force has shrunk. Put more succinctly, there are fewer people in the country, meaning the economy does not need to produce as many jobs compared to previous years. Thus, the labor market is recalibrating to this new reality rather than stalling.
There are several problems with this argument and its suitability in explaining current labor market conditions. Both studies estimate that the break-even employment rate is somewhere between 30,000 to 50,000 monthly job gains. However, 3 out of the last 4 months have seen fewer than 25,000 jobs added, including a net loss of 13,000 jobs in June. Additionally, the link between immigration and the break-even rate must be taken into account along with the sectoral differences present in the labor market.
Although the break-even rate is an economy-wide threshold, most undocumented workers are concentrated in a handful of sectors, such as the construction and hospitality industries. The former industry has been stagnant, while the latter has added about 100,000 jobs this year. Recalibration would mean decreases in employment levels among industries that employ large numbers of undocumented immigrants, which is not happening.
A recalibration in the labor market implies that demand is adjusting to a decrease in the supply; in this context, the number of available workers. This adjustment in labor supply would take the form of an increase in the demand for workers. If the labor market were recalibrating, there wouldn’t be increases in Black unemployment and joblessness among new college graduates. Pay for workers would not be stagnant, especially for those who are changing jobs. The fact that long-term unemployment has risen alongside the average length of joblessness while the resignation rate remains low implies that rather than recalibrating, the labor market is stalling.Â
The question of whether the labor market is slowing down or recalibrating is crucial to the Federal Reserve’s decision to continue cutting interest rates, which will be determined at its October 29th meeting. In the absence of official data, they will be forced to rely heavily on ADP, Revelio and other private data sources. In theory, a decline in interest rates should stimulate the economy and the labor market, thus giving relief to millions of unemployed and underemployed workers.
The government shutdown is expected to last well into November, potentially halting the release of the next month’s jobs report as well. Because September and October are the crucial seasonal hiring months, the lack of official data complicates the ability to accurately analyze hiring trends for the upcoming holiday season.
As the economy enters the final months of the year, the labor market should be seen as stalling rather than simply recalibrating. This designation captures the reality for millions of Americans dealing with joblessness and an inability to find new work. The failure to recognize this fact could mean that much-needed relief may not come as job gains further stall and potentially shift into an even worse situation.
Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.
Photo credit: Karola G. from Pexels.com.
