Copyright Newsweek
While the government shutdown has delayed the release of official employment data, alternative estimates point to a further slowdown in the labor market that could influence the Federal Reserve as it considers its next move. According to a recent assessment of job market trends from payroll processing firm ADP, America’s private employers shed an average of 11,250 jobs a week in the four weeks ending October 25. Meanwhile, Goldman Sachs analysts on Monday estimated that nonfarm payrolls shrank by about 50,000 in October, in what would mark the largest monthly loss since 2020. Why It Matters Government readings prior to the shutdown already showed the U.S. jobs market to be on shaky footing, and private market estimates suggest that this weakness has carried over into September and October. While this contributed to the Fed’s decision to begin lowering rates in September after a nine-month hiatus, policymakers are now confronted with a resurgence in inflation, which reached its highest annual rate since January in the latest print from the Department of Labor. What To Know The latest data from ADP indicates that the labor market experienced a significant slowdown in the second half of October. ADP last week reported that private-sector jobs grew by 42,000 during the month, exceeding the FactSet consensus estimate of 37,500 and up from a loss of 29,000 in September. In its report on Tuesday, ADP noted that the figures are preliminary “and could change as new data is added.” A Dow Jones survey offered an even gloomier outlook for the job market. According to Forbes, the economists polled projected a loss of 60,000 jobs in October, along with an uptick in the unemployment rate to 4.5 percent from 4.3 percent, according to the latest government reading for August. The Indeed Hiring Lab, meanwhile, found that job postings fell to their lowest level since 2021 in late October, “with year-over-year declines recorded in almost every sector.” Against these worrying signals and the apparent need to prop up the labor market, and despite renewed fears over inflation, the Federal Reserve is expected to enact another rate cut following its next meeting December 9-10. Some 80 percent of economists polled by Reuters believe the Fed’s Open Market Committee will lower its key rate by 25 basis points for the third time in a row. The CME FedWatch tool, meanwhile, puts these odds at 65 percent—down from nearly 92 percent in early October—with a 35 percent chance of the Fed maintaining its current target range of 3.75 percent to 4.0 percent. What People Are Saying Fed Chair Jerome Powell, at the National Association for Business Economics annual meeting on October 14: “In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen. While official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low and that both households’ perceptions of job availability and firms’ perceptions of hiring difficulty continue their downward trajectories.” James Knightley, the chief international economist at ING, told Newsweek in October: “My biggest concern...is that workers are worried that job losses will mount. People see and feel changes before they show up in the data—you know if your company has a hiring freeze or if they’ve let a few people go. People tend to think this may be the start of something, and unfortunately, history shows us they tend to be right on that.” What Happens Next Almost all government data releases have been postponed because of the government shutdown, which is on the verge of coming to an end pending a vote in the House on Wednesday afternoon.
