Alternative Data Replaces Delayed Official Reports
With the federal government shutdown halting key economic releases, economists are relying on alternative data sources to gauge the state of the U.S. job market. Early indicators suggest that employment growth in September remained sluggish, with hiring stagnating and the unemployment rate steady at 4.3%. The shutdown, the country’s 15th since 1981, has furloughed around 750,000 federal workers and delayed essential data from the Bureau of Labor Statistics, including the monthly jobs report that guides Federal Reserve policy decisions.
In the absence of official figures, the Federal Reserve Bank of Chicago’s new real-time estimate of the unemployment rate has drawn attention. The data, which combines private and public inputs, suggests that fears of a sudden spike in unemployment have not materialized. Chicago Fed President Austan Goolsbee said the estimate points to “some steadiness in the labor market,” even as broader conditions remain weak.
Private Data Reveals Weak Hiring and Rising Caution
The Chicago Fed’s new labor data, updated twice a month, showed a minor decline in the hiring rate for unemployed workers and a slight increase in layoffs, producing “limited upward pressure” on unemployment. Additional private reports echoed the same sluggishness. ADP data indicated a loss of 32,000 private-sector jobs in September, while Intuit reported that small businesses with one to nine employees cut over 48,000 positions during the month.
These findings align with research from Challenger, Gray & Christmas, which reported that U.S. employers announced fewer layoffs in September—down 37% from the previous month—but hiring plans remain historically low. So far in 2024, announced job cuts have totaled nearly 950,000, the highest since 2020, while new hiring plans are at their lowest level since the aftermath of the Great Recession.
Economic and Policy Factors Behind the Slowdown
Economists point to several causes for the labor market stagnation. A combination of high borrowing costs, trade policy uncertainty, and rapid technological change—particularly the spread of artificial intelligence—has dampened demand for workers. Meanwhile, tighter immigration policies under the current administration have further constrained labor supply, particularly in sectors dependent on foreign-born workers.
Nonfarm payroll growth averaged just 29,000 per month from June through August, far below last year’s pace of 82,000. Yet the unemployment rate has held steady, highlighting a disconnect between weak job creation and labor market tightness. Surveys by the National Federation of Independent Business show that while 58% of small businesses plan to hire, nearly 90% report difficulty finding qualified applicants.
Fed Policy Outlook and Broader Implications
The Federal Reserve, which meets on October 28–29, faces increasing pressure to decide whether to cut interest rates again. Last month, the Fed reduced its benchmark rate to a range of 4%–4.25% following slower job gains and a modest uptick in unemployment. The latest private data is likely to keep policymakers leaning toward another quarter-point rate cut as they seek to support a stagnating labor market without reigniting inflation.
If the government shutdown continues, additional key indicators—such as consumer prices, retail sales, and housing data—may also be delayed. This data blackout could complicate decisions for households, investors, and central bankers alike, leaving alternative private sources as the only window into the state of the U.S. economy.