Why This Jobs Report Will Be a Mess

Why This Jobs Report Will Be a Mess

The Labor Department will release its monthly estimate of hiring and unemployment at 8:30 a.m. Friday. Economists surveyed by MarketWatch expect the report to show a gain of 172,000 jobs in January, down from the 312,000 added in December. But there’s even more uncertainty than usual.

The job market ended 2018 in its best shape in years, possibly decades. That strength probably continued in early 2019 — but the partial shutdown of the federal government could make it hard to know for sure.

American employers have added jobs for 99 consecutive months, easily a record, and most economists expect the streak to hit 100 with Friday’s report. The unemployment rate is under 4 percent for the first time since the Clinton administration, and wage growth — long a weak point — has been picking up. December’s job figures, which will be revised on Friday, were among the strongest of the entire recovery.

But the shutdown idled hundreds of thousands of federal workers for much of January, and left hundreds of thousands of others working without pay. Ripple effects hit everyone from unpaid government contractors to Washington lunch spots that lost business.

Government contractors generally won’t receive back pay, so if they didn’t work, they won’t be counted. Ditto for other private-sector workers who were laid off (or weren’t hired) because of the shutdown. But most economists expect those effects to be small in the context of an economy that employs more than 150 million people.

“It’s really likely that we wake up on Friday, we look at the data, and we don’t see the shutdown,” said Martha Gimbel, director of research for the job-search site Indeed. “That is going to be frustrating for a lot of people who have been hearing about how the shutdown has been affecting everyone.”

There is one place the shutdown will probably show up: the unemployment rate. Unlike the monthly hiring figures, which come from a survey of employers and are based on the number of people on their payrolls, the unemployment rate is based on a survey of households. In theory, furloughed government workers should have counted as temporarily unemployed in the survey. That could push up the unemployment rate by one- or two-tenths of a percentage point.

In practice, however, the effect may be smaller. During the last extended government shutdown, in 2013, some federal workers incorrectly recorded themselves as being absent from work, not unemployed.

Some economists think the shutdown could have a bigger impact on the job numbers. ZipRecruiter, an online job site, ran a survey in late January asking employers whether the shutdown had affected their business. About 12 percent said it had, citing everything from lost business to stalled small business loans. Several noted that E-Verify, the government system used by some large employers to check the immigration status of new or prospective employees, was offline, leading them to delay hiring.

Julia Pollak, a ZipRecruiter economist, said the E-Verify delays and other factors could have been enough to slow hiring significantly in January. But those effects will be temporary.

The larger challenge, she said, is that it will be hard to know how to interpret the numbers, good or bad. If the unemployment rate stays steady, does that mean the shutdown didn’t have an effect, or that the rate would have fallen without it? If restaurant hiring slows, does that mean families ate out less because of the shutdown, or because of other economic fears — or does it merely reflect normal monthly volatility?

Adding to the challenge: December’s job numbers were unusually strong, making a January comedown likely even without the shutdown.

“It’s a hard counterfactual to figure out,” Ms. Pollak said.

For all the uncertainty, this much seems clear: The job market is strong.

Claims for unemployment insurance recently hit a nearly 50-year low. Paychecks are growing — data released Thursday showed that wages and salaries rose 3.1 percent in the final three months of 2018 compared to a year earlier, the best mark since the recession ended a decade ago. Once-struggling sectors like manufacturing and retail added jobs in 2018.

“The underlying foundation hasn’t changed,” said Becky Frankiewicz, president of ManpowerGroup North America, a staffing firm. She said what she was hearing from clients was “nice, robust optimism continuing around hiring.”

But there are hints of trouble. The manufacturing sector weakened in December, and many economists expect a further slowdown if the Trump administration imposes new tariffs on China this year. Consumer confidence dropped sharply in January, and it isn’t clear how quickly it will bounce back given the threat of another shutdown looming just weeks away.

So far, those fears haven’t hurt the labor market. But another shutdown or other bad news could lead companies to pull back.

“There’s a caution or concern in people’s voices, but it hasn’t turned into action,” said Teresa Carroll, executive vice president for Kelly Services, a staffing firm. “Anybody in a hiring situation in a company is probably waiting for that next shoe to drop, but it doesn’t mean they’re stopping.”

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