Monthly jobs report could be a casualty of government shutdown
Economists fall hard for certain sets of data released by the U.S. government, and a favorite is the monthly jobs report.
But if the government shuts down this week, economists won’t be spending their Friday slicing and dicing the Labor Department’s closely watched statistics on total nonfarm payroll employment and the unemployment rate.
The Labor Department won’t release its monthly employment report if the federal government is closed Friday, the day of the scheduled release, an Obama administration official told Bloomberg News late Monday afternoon.
The absence of that jobs data not only would be an inconvenience for economists, but it also would make it tougher for investors and companies to gauge economic progress at a time when the recovery from the Great Recession is fragile, said Jack Ablin, chief investment officer for BMO Private Bank in Chicago.
“A lack of economic data will add to uncertainty, which could kick up equity market volatility and prod business decision-makers to postpone capital investment and hiring decisions,” Ablin said.
To be sure, there are other sources of economic data.
Payroll processing company ADP offers net job growth numbers on a monthly basis, Ablin noted. Manufacturing data is generated by the Institute for Supply Management, and the University of Michigan provides a pulse of consumer confidence.
But economists say the Labor Department jobs numbers are special.
“The employment report is the single most important economic report to the Fed and financial markets,” said Diane Swonk, chief economist for Mesirow Financial in Chicago. “Businesses who employ economists also use this data in their business strategies.”
A delay in the data release wouldn’t be so bad, but having no timetable would be problematic, she said.
“It’s the collateral damage created by the broader uncertainty that it represents that is more important in thinking about this issue,” Swonk said.
She noted there’s a risk that, without government data, financial markets would put too much emphasis on data generated by the private sector.
“Private sector data can also be revised and manipulated more directly than government sector data and is not subject to the same quality controls as government sector data,” Swonk said.
And the United States isn’t just any nation, but rather the nation that others rely on for information.
“A lack of clarity on how the U.S. economy is doing could affect policy decisions the world over,” Swonk said. “It may not sound sexy to say that this matters because it matters to financial markets, but our economy needs that capital provided by financial markets to function.”
But Mike Moebs, economist with Moebs Services in Lake Bluff, Ill., said Labor Department reports can be “uneven.”
Carl Tannenbaum, chief economist for Northern Trust Corp. of Chicago, said that of all the monthly economic indicators, “the employment data are by far the most important.”
“The employment release always generates a flurry of market activity, as it’s a bellwether for money managers,” he said. Also, the Federal Reserve is influenced by employment readings, “so a delay in the information would create additional confusion over when the Fed might begin to taper” its quantitative easing program, which includes the Fed buying bonds as a way to help keep interest rates low in a sluggish economy.
“So the Fed, and Fed watchers, would be disappointed in any delay in the release,” Tannenbaum said.
Although there are other jobs data providers, “none are as widely used,” he said. “For portfolio managers and policymakers, this will be like flying an airplane without adequate instruments.”
An interruption in economic data flow isn’t the most serious aspect of a government shutdown, but it would be a serious matter if releases are delayed for a long time, he said.
“As unknowns rise, investors may become more cautious, which would likely reflect in poor stock market results,” Tannenbaum said. “If the impasse is resolved, history tells us that any losses will be regained fairly quickly.”
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During the previous federal government shutdown, in 1995, Labor Department analysts already had prepared the estimates for the monthly consumer price index report when agency funding ran out. Fearing inflation data could leak, the Office of Management and Budget allowed a small number of employees to finish the report.
Economists project Friday’s labor report would show the economy added 184,000 net new jobs in September, up from 169,000 the previous month, and the unemployment rate held steady at 7.3 percent.
The jobs report has two components.
A survey of households determines the unemployment rate and typically is finished by the end of Monday of the week the report is scheduled for release. The second part, a survey of businesses that determines the job-creation figure, is finished by Wednesday.
(Jim Puzzanghera of the Los Angeles Times contributed to this report.)
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