The US federal government shutdown, which ended this week, has left markets without official unemployment data for September or October. As a result, investors have started looking for alternative indicators.
One of many alternative indicators of the health of the US labor market is the survey of consumer expectations by the New York Federal Reserve. It maps the expectations of households on the labor market and provides indications about their perception of employment.
The findings of the latest study (based on average probability) are:
- The probability that the US unemployment rate will be higher a year from now increased by 1.4 percentage points to 42.5% – well above the series average (calculated as of June 2013) of 37.4% and the 2024 average of 36.5%.
- The perceived probability of losing your job in the next 12 months has fallen by 0.9 percentage points to 14.0% – close to the long-term and 2024 averages.
- The perceived probability of finding a job if you lose your current job fell by 0.6 percentage points to 46.8% (see Figure 1).
In a nutshell, this research can be seen as a new signal pointing to a weakening of the US labor market (i.e. a higher unemployment rate), with downside risks (it’s harder to find a job), but no impending red alert.
Official data should start flowing again now that President Trump signed the Continuing Appropriations… and Extensions Act, ending the longest government shutdown in US history.
With the White House suggesting that the October jobs report (which should have been released in early November) is unlikely to be released, and the September report won’t be available until next week, there won’t be much clarity on the state of the US labor market in the near term.
It is hoped that the fog will clear before the next interest rate meeting of US Federal Reserve policymakers. For the Fed, promoting maximum employment is a central goal, and this has gained importance in its assessments in recent months. Without a clear picture of the labor market, the Fed’s hands could be tied and further rate cuts may have to wait until 2026.
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