Alternative jobless claims data could suggest further weakening ahead

Key Concepts

• Jobless Claims Data
• Alternative Job Numbers
• Labor Market State
• Government Shutdown
• Continuing Claims
• Mass Layoffs
• Federal Workers
• ADP Preliminary Data
• Challenger Job Cuts Report
• Chicago Fed Unemployment Rate Estimate
• Indeed Jobs Posting
• ISM Manufacturing and Service Employment Indices
• CNBC.com Alt Data
• Bureau of Labor Statistics (BLS) Report
• November Employment Report
• Attrition
• Restructuring
• Overhiring
• Labor Hoarding
• Cyclical Weakness

Jobless Claims and Labor Market Assessment

This segment discusses the latest jobless claims data from the US government, particularly in the context of a government shutdown. Senior economics reporter Steve Leeman provides an analysis of this data alongside various alternative job numbers to assess the current state of the labor market.

Jobless Claims Data

• Source: Gathered individually from states and seasonally adjusted by Haver Analytics.
• Initial Claims: Rose by 10,000 on the week, reaching a modest 229,000. This figure is at the higher end of the range observed over the past several months but is not considered alarmingly high.
• Continuing Claims: Are edging higher, which, combined with a surge in mass layoffs reported previously, suggests potential further weakening in the labor market ahead. This trend is noted as something to "bear watching."

Federal Worker Claims

• Surge: Continuing claims specifically for federal workers continue to surge, now exceeding 23,000.
• Significance: This is the highest level since 2019 and is attributed to the impact of the government shutdown. It also reflects the beginning of a wave of laid-off federal workers becoming eligible for and applying for benefits.

Alternative Job Numbers and Labor Market Impression

The discussion highlights a "slew of alternative jobs reports" that collectively provide an impression of a labor market that is "cooling, but not crashing." No single indicator is signaling runaway trends in either direction.

Signs of Strength or Stability:

• ADP Preliminary Data: Reported an average of 14,000 weekly job gains a week prior.
• National Report (ADP): Improved from -29,000 to 42,000.
• Chicago Fed's Unemployment Rate Estimate: Presented as "pretty much unchanged around 4.3%."

Signs of Weakness:

• Challenger Job Cuts Report: Identified as a top indicator of weakness, with a gain of 153,000.
• Continuing Claims: Edging higher towards the top of their range.
• Indeed Jobs Posting: While above the standard of 100, it has been "ticking down continuously."
• ISM Manufacturing and Service Employment Indices: Both indices had ticked up on the week but remained below 50, leading to their subjective categorization into the "weakness categories."

The Role of Alternative Data and the Fed

• CNBC.com Alt Data: A new site has been created to cover alternative data.
• Federal Reserve's Perspective: The Federal Reserve is likely examining all this data, including potentially more alternative data sources.
• Missing Data: A key observation is the lack of good alternative data on prices, with plans to roll out some next week.

Challenges in Interpreting Data and Market Reactions

• Uncertainty: There's an acknowledgment that it's difficult to definitively argue whether the job market is "fine" or "not so fine," as the alternative data presents a mixed picture.
• Intuition vs. Data: Experienced reporters often rely on an intuitive "feel" for data when numbers deviate significantly from expectations. However, with the current alternative data, this intuitive feel is lacking due to its novelty and the difficulty in understanding its real-time reactions.
• Market Reaction: The market appeared to react to the Challenger data the previous day, and the speaker is observing how the market will respond to subsequent data releases.

The Impact of the Government Shutdown on Official Data

• November Employment Report: If the government can resolve the shutdown within the next five to six days, the November employment report might still be released.
• Historical Precedent (2013): In 2013, the BLS managed to release data with a one-week delay, albeit with some "asterisks." This suggests a possibility of the November report being salvaged.
• Funding for BLS: A humorous suggestion is made for a benefactor to fund the BLS report, similar to how military payments were handled.

Conclusion on Labor Market State

• Unlikely Major Swings: It is considered unlikely that there is a significant swing in the job market that is not being picked up by the alternative data.
• ADP's Predictive Power: While ADP data may not be perfectly accurate month-to-month, it generally indicates the direction of job gains over a series of months.
• Cooling, Not Crashing: The consensus, supported by Austin Goulby's statement, is that the current jobless claims data in their present range makes a job market crash "unlikely." The market is characterized as "lackluster" and "cooling, but not crashing."

Nuances in Layoff Data

• Challenger Report Context: The "worst October since 2003" figure from the Challenger report should be viewed with some caution.
• Layoff Announcements vs. Actual Layoffs: A layoff announcement does not always translate into an immediate, actual layoff. Companies can manage workforce reductions through attrition and other methods, and these processes can occur over time.
• Contributing Factors: Significant restructuring in the tech sector, overhiring, and potential labor hoarding from the pandemic are cited as reasons for some of the reported layoffs.
• Cyclical Weakness: It is uncertain whether these layoffs represent a true cyclical sign of weakness or are driven by these other factors. The speaker suggests observing if this trend continues in November.