The Job Market Shows Few Signs of Stress, Based on the Latest Data

Private-sector reports suggest that companies are continuing to hire, even though layoff announcements are rising. (Allison Joyce/Bloomberg)

Friday marked the record 38th day of the federal government’s shutdown, which meant the Bureau of Labor Statistics didn’t publish the official monthly jobs report. But alternative sources of data show that the employment situation was relatively stable in October, the second straight month for which the BLS didn’t publish data. The positive picture is notwithstanding a headline-grabbing report of a surge in layoff notices, which don’t necessarily translate into sackings.

To be sure, the pace of payroll growth has slowed as the year has progressed, which has prompted the Federal Reserve to resume lowering its policy interest rate. But uncertainty about other economic policies—notably tariffs—may be curbing hiring more than monetary policy.

Financial conditions remain accommodative, as evidenced by the record stock market (apart from a hiccup this past week), along with credit markets that are eagerly absorbing record corporate borrowing, including to fund multibillion-dollar artificial-intelligence investments. That belies assertions of too-tight Fed policy.

Among alternative data sources (not to be confused with “alternative facts”), the Chicago Fed estimated last month’s unemployment rate at 4.36%, almost unchanged from its September estimate of 4.35%. The BLS put the August jobless rate at 4.3%, rounded to a single decimal place.

ADP’s measure of private-only payrolls posted a larger-than-expected increase of 42,000 last month after September’s revised dip of 29,000. The previously maligned ADP gauge has confirmed the plateauing of payrolls outside the government sector. Revelio Labs, another private data tracker, estimated that overall payrolls dipped by 9,100 in the latest month, reflecting a 22,200 decline in government employment.

Similarly, the Bank of America Institute found no further slowdown in employment in October, based on its tracking of internal deposit flows. Payrolls were up 0.5% from a year earlier, unchanged from September. The number of households receiving unemployment benefits rose 10% in October from a year earlier, the same as the preceding month.

While the BLS isn’t reporting weekly unemployment claims during the shutdown, underlying data from the states indicate that claims remain low, according to a client note from BCA. The last BLS report showed 218,000 claims filed in the week ended on Sept. 20.

But those numbers were overshadowed by the headlines this past week from Challenger, Gray & Christmas that layoff announcements surged last month to a 22-year high of 153,000. Technology saw 33,000 layoff announcements, bringing the year-to-date total to 141,000, up 17% from the year-earlier period. As noted, those previously announced layoffs haven’t shown up in the jobless claims.

A less-acknowledged factor in this year’s slowdown in payroll growth has been uncertainty in economic policy, according to John E. Silvia, who heads Dynamic Economic Strategy after retiring as chief economist for Wells Fargo.

An index tracking economic policy uncertainty developed by economists Scott R. Baker, Nick Bloom, and Steven J. Davis has nearly tripled since the end of 2024, although it has receded sharply from its early April peak just after “Liberation Day,” when a slew of draconian tariffs were announced.

As an example, Silvia points to a comment contained in the October ISM report released this past week: “Business continues to remain difficult, as customers are canceling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape.”

On that score, the Supreme Court heard oral arguments on the use of the International Economic Powers Act by the president to impose tariffs. Polymarket betting odds that the administration would prevail took a sharp dip, from about 40% prior to the hearing this past Wednesday to 29% on Friday. Even if it loses, the administration is expected to find alternative means to impose tariffs. So, the uncertainty is likely to persist.

Meanwhile, consumers surveyed by the University of Michigan were glum. The latest UMich sentiment gauge slumped 3.3 percentage points to 59.3%, the lowest reading since June 2022, depressed by worries about potential negative economic consequences from the ongoing shutdown.

Yet investors seem unperturbed by the resulting absence of government data, wrote John Higgins, chief markets economist of Capital Economics, in a client note on Friday. While volatility measures in the equity and bond markets ticked up in recent days, coincident with the selloff in frothy AI-related megacaps, they haven’t moved much on balance since the Oct. 1 shutdown start and remain subdued.

The aforementioned alternative data “have not rung any alarm bells,” while so far this corporate earnings season, 85% of S&P 500 companies have beat estimates, Higgins wrote. The longer the government shutdown drags on, the greater the chance the economy takes a hit, he said. Polymarket bettors on Friday were putting a 42% probability on an end by Nov. 15 and a 93% chance on a resolution by Nov. 30.

If so, we should have a clearer view sometime next month. But for now, no official news on the economy seems mostly OK news.

Write to Randall W. Forsyth at randall.forsyth@barrons.com