US labor market indicators weaken amid a government shutdown
Consistent messages of labor market softness
Please see here our special commentary on the US government shutdown.
We have been arguing for quite a while that the US labor market is not nearly as robust as the unemployment rate makes it appear. The release of the premier employment report has been delayed due to the government shutdown that began on October 1, but other reliable signals offer a consistent message of labor market softness. The Conference Board labor differential slipped 3.3 points to 7.8, the second-largest monthly decline this year and the lowest level since February 2021. Meanwhile, the hire rate in the JOLTS report dipped to 3.2%, only a hairbreadth above the Covid low and otherwise the lowest since 2012. The “slow hire” risks turning into a “no hire” narrative if this persists.
Yes, it will be good for the Fed to have updated labor market data in hand before the October 29 meeting (and they most likely will). However, there is more than enough information already available to justify another 25-basis-point cut at that meeting. If anything, we are watching with some anxiety to see how the data will reflect the end of the deferred retirement deal which about 75,000 federal employees took. In addition to the shutdown itself, this, too, will create data noise in coming weeks. Amid all the noise, however, the message is consistent and clear: the labor market needs some help from the Fed.
