January Jobs Day Preview

On Friday, we’ll get the jobs report for December. While it is always useful to get an updated view on the labor market, this report is particularly important because it looks like the November report was still impacted by the government shutdown. 

Stating with certainty that any monthly movement in a particular indicator is due to a specific event is hard—especially  when we don’t have that many instances of that event historically to compare to. (For modern comparable shutdowns we have 2013 and 2018-2019). But there are three measures that are suggestive of the shutdown lingering in the jobs report.

First, the share of the unemployed on temporary layoff tends to jump up around shutdowns. Relatively speaking, the jump up was bigger  in 2013 than in 2018-2019, but the rise in this measure in November suggests that the shutdown may have played a role there.

Second, the rate of workers working part-time for economic reasons jumped pretty substantially in November—up 0.5 p.p from September. The last time there was a jump that big over two months was during Covid and prior to that September 2011. But as both Ben Casselman and Ernie Tedeschi have pointed out, that may simply reflect the shutdown (it jumped in 2018-2019, but not in 2013).

Finally, the unemployment rate for government workers also rose substantially, as it has done in past shutdowns. Of course, this could also reflect the delayed effects of DOGE which took place in October.

And of course that is the exact issue. Maybe we shouldn’t worry about the jump in the part-time for economic reasons rate because it’s about the shutdown. But maybe it’s a sign of economic weakness and we should. Maybe the rise in the unemployment rate for government workers is about DOGE…or maybe it’s the shutdown? Maybe temporary layoffs are picking up? 

The shutdown not only lost us data for October, but it likely contaminated the data for November. Fortunately, on Friday, we should finally get a clean read on the labor market.