State of the Labor Market

Jobs Report Preview: Will the Shutdown Show up in the Jobs Report?


Will the longest government shutdown in history impact the latest jobs growth numbers this week?

The government shutdown has finally ended—at least temporarily—but many Federal and government contract workers are still recovering from over a month without a paycheck. However, in the jobs growth numbers coming out on Friday, it may be difficult to see the impact of the shutdown at all. The recent two long Federal shutdowns (2013 and 1995-1996) did not show up in the headline Bureau of Labor Statistics (BLS) employment numbers – and whether it shows up now will partly depend on how workers identify themselves.

The shutdown is most likely to show up in the unemployment rate, but only if Federal and government contract workers identify themselves as unemployed. Given that the unemployment rate bounces around from month-to-month (and at 3.9% it is below the 4.4% that the Federal Reserve considers to be sustainable long-term), one way to see if any increase in the unemployment rate is actually due to the shutdown is to look at the unemployment rate for just government workers.

For the last two years, the January unemployment rate for this group was 2.2%. A number substantially higher than that would likely reflect the impact of the shutdown. (In the October 2013 shutdown, the unemployment rate for this group rose, whereas otherwise in recent years the seasonal pattern was to fall or functionally hold steady from September to October). It is important to examine this metric carefully since it is not seasonally adjusted.

Previous major shutdowns did not show up in the headline unemployment rate (although they were less severe). In 2013, BLS did see an increase in Federal government workers who were unemployed, but also an increase in Federal government workers who identified themselves as employed, but absent from work. Keep in mind that the Bureau of Labor Statistics has a specific definition of what counts as unemployed, and if workers do not answer the questions in the way that meets BLS’s definition, they would be counted as either employed or out of the labor force, rather than unemployed.

On the payroll side, we are likely to see no impact of the shutdown. BLS is planning on counting workers who were furloughed but will be paid after the shutdown ends as employed, which means that the Federal government employment number is unlikely to be affected.

In addition, it seems likely that private-sector numbers may not show much of an effect. There are no private-sector industries where month-to-month growth is strongly correlated with growth in the Federal government sector. So there is no one private-sector industry that we should be looking at to be affected by the shutdown. And given that employers probably did not decide to lay workers off after a month, sectors like retail and leisure and hospitality that could have been hurt if government workers cut down on spending, and in professional and business services if contractors started laying workers off should not see the type of employment effects from the shutdown that would show up in the jobs numbers.

Any weak private-sector number could also be due to non-shutdown factors. Private-sector employment growth bounces around quite a bit from month-to-month, which could make it hard to identify a specific shutdown effect. During its current streak of straight job growth, the number of jobs added each month has ranged from 16,000 to 356,000. And there are other headwinds specific industries are facing right now: for instance, manufacturing is dealing with tariffs and retail is still figuring out how to handle ecommerce.

Overall, it is plausible that despite the stress that Federal government and contract workers just experienced, the headline jobs numbers on Friday look standard. Which is not to say that the shutdown did not have economic (or emotional) impacts on Americans, simply that the jobs report may not be the best data to capture those impacts.

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