Fed Turns to Private Data as Government Shutdown Delays September Jobs Report

The September jobs report never came. On Friday, October 3rd, when the Bureau of Labor Statistics was supposed to release its monthly snapshot of American hiring and firing, the agency's website instead displayed its most recent update from Wednesday—a bureaucratic ghost of what should have been there. Across Washington, furloughed BLS employees sat at home while the Federal Reserve and Wall Street's economists scrambled to piece together the labor market from whatever scraps of private data they could find.

The timing could not have been worse. The Fed is preparing for a critical meeting on October 28th and 29th, when officials will decide whether to cut interest rates again. That decision hinges partly on whether unemployment is holding steady or beginning to accelerate—a distinction that could mean the difference between a soft landing and a jobs crisis. The monthly employment report is the gold standard for that kind of judgment. Without it, policymakers are left guessing, and guessing in a moment when the stakes are high.

But they are not completely blind. The Chicago Federal Reserve, coincidentally, began releasing its own unofficial estimate of the national unemployment rate using private real-time data, and it showed the rate holding roughly steady at 4.3% last month. Goldman Sachs, mining state unemployment claims still being reported to the Department of Labor, estimated that new jobless claims ticked up slightly to 224,000 for the week ending September 27, while the number of people on benefits rolls beyond one week fell slightly the week before. Neither signal suggested the labor market was cracking. On Friday, the Institute for Supply Management released its closely watched survey of the services sector, which showed activity stalling in September. Employment in that sector inched higher but remained in contraction territory for the fourth straight month—companies were reluctant to backfill open positions and struggling to find qualified applicants.

What emerged from this patchwork of private sources was a portrait of a labor market frozen in an unusual state. Michael Pearce, deputy chief U.S. economist for Oxford Economics, combed through payroll processor ADP data showing job declines in September and staffing firm Challenger, Gray and Christmas data showing a drop in layoffs. He coupled that with internal models of workers flowing into and out of jobs and saw no dramatic change between September and August. "What is clear," he wrote, "is that labor market conditions are still characterized by a no-hire, no-fire environment." Bill Adams, chief economist at Comerica Bank, echoed the phrase: the economy remained in a "low-hire, low-fire, low-gear mode," but with risks. Layoffs were running quite low—a Cleveland Fed staff model based on layoff WARN notices was down 22% in August compared to the year before—but hiring intentions were down by even more. The U.S. was at best adding jobs well below trend, and perhaps shedding them. Francesco Renna, an economist with Chmura Economics & Analytics, found that job postings on the JobsEQ site were down 10% from August to September. Hiring had slowed enough to make it harder for the unemployed to re-enter the workforce, but with layoffs also contained, he did not expect the September unemployment rate to rise significantly.

The Fed has been wrestling with this state of affairs for months. Some policymakers see it as a sign of resilience—employers holding onto workers they fought hard to hire during the post-pandemic recovery. Others see it as a crack that could turn into a rupture. Federal Vice Chair Philip Jefferson said on Friday in Philadelphia that "we have enough information to do our job" and that he expected to be "well informed" before the October meeting. But the longer the government remains idle, the more policymakers and markets may be driven by the best guesses of analysts, each parsing the information at hand in their own way.

What worries the Fed most is what it cannot see right now. Average hourly earnings are an important barometer of the balance between supply and demand for workers. Daniel Zhao, chief economist with GlassDoor, said the firm's data showed salaries slipped 0.4% from August to September, while year-over-year wage growth dropped from 5.4% to 4.9%—the slowest pace since April. Fewer job candidates were rejecting offers, suggesting that more workers were settling for positions they might have turned down a year ago, consistent with a weaker job market. But other closely watched details may have to wait for the BLS to turn the lights back on. Fed Chair Jerome Powell and other policymakers have 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 granular detail is why Fed officials still refer to the BLS report as the gold standard, something they lack at least for now. The October rate decision will proceed without it.