The September jobs report is delayed by the government shutdown - what was it expected to show?

The September jobs report was delayed by the government shutdown, prompting reliance on alternative data for labor market insights. Economists had projected 50,000 new jobs and a flat 4.3% unemployment rate, while the Chicago Fed's real-time forecast indicated a slight unemployment increase to 4.34% and a minor dip in hiring. Despite small businesses reporting persistent labor shortages, a net 16% plan to create new jobs, with overall sentiment suggesting no immediate recessionary signals. The official report is expected to be released shortly after the shutdown concludes, consistent with historical patterns.

Analysis

The delay of the September jobs report due to the government shutdown has shifted investor focus to alternative, higher-frequency data to assess labor market conditions. Consensus economist expectations, per LSEG, pointed to a continued soft trend with a gain of just 50,000 jobs and a stable unemployment rate of 4.3%. This aligns with real-time indicators from the Federal Reserve Bank of Chicago, which forecast a marginal increase in the unemployment rate to 4.34%, a slight decline in the hiring rate for unemployed workers, and a minor uptick in separations. However, this high-level softening is contrasted by more resilient signals from the small business sector. The NFIB survey indicates persistent labor tightness, with 32% of owners unable to fill open positions and a net 16% planning to create new jobs—a figure that has increased for four consecutive months. This dichotomy suggests a nuanced market where some businesses are hesitant to expand due to economic uncertainty, while others face structural hiring challenges, a condition the NFIB terms a 'jobless recovery.' Importantly, the NFIB's broader sentiment data suggests no imminent recessionary signals, providing a crucial counterbalance to the slowing headline figures.

Key Decisions for Investors

• Given the conflicting signals between softening macro forecasts and resilient small business hiring intentions, investors should exercise caution before making significant directional bets on the labor market's trajectory.
• Monitor high-frequency alternative data, such as the NFIB survey and weekly jobless claims, to navigate the period of uncertainty until the official Bureau of Labor Statistics report is released post-shutdown.
• Consider the possibility of sustained wage pressure in skilled sectors, as indicated by the NFIB's findings of unfilled skilled job openings, even if overall employment growth remains tepid.
• Re-evaluate portfolio exposure to sectors sensitive to labor availability versus those more impacted by slowing aggregate job growth, as the data suggests a bifurcated market rather than a uniform slowdown.