Labor and inflation statistics from alternative sources: Here's what to know

Key Concepts

• Government Shutdown: A period when non-essential government operations cease due to a failure to pass appropriations bills.
• Economic Data: Statistics and information used to measure and analyze the performance of an economy.
• Jobless Claims: A measure of the number of people filing for unemployment benefits.
• Initial Jobless Claims: Claims filed by individuals for the first time seeking unemployment benefits.
• Continuing Claims: Claims filed by individuals who have been receiving unemployment benefits for more than one week.
• Seasonally Adjusted: Data that has been adjusted to remove the effects of predictable seasonal patterns.
• Haver Analytics: An economic data provider.
• Federal Reserve (The Fed): The central banking system of the United States.
• Rate Cut: A reduction in the target interest rate by a central bank.
• Troy Lutka (SNBC Neo Securities): An analyst providing alternative economic data.
• Regional Fed Surveys: Surveys conducted by regional Federal Reserve banks to gauge economic conditions.
• Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
• ADP Data: Weekly employment data released by Automatic Data Processing, Inc.
• Tariffs: Taxes imposed on imported goods.
• Beige Book: A report published by the Federal Reserve eight times a year that describes current economic conditions in each Federal Reserve District.

Alternative Economic Data Sources During Government Shutdown

The ongoing government shutdown, now 31 days old, has significantly limited the release of official economic data. However, alternative sources are providing crucial labor and inflation statistics. Senior economics reporter Steve Leeman has been actively seeking and analyzing this data.

Labor Market Insights

• Jobless Claims Estimates:

  • Preliminary estimates for initial jobless claims, seasonally adjusted by Haver Analytics, show a decline of 13,000 to 219,000 for the week.
  • This figure represents the lowest level in a month.
  • Continuing claims, however, rose by 11,000 to 1.96 million, reaching their highest level since August.
  • These estimates are based on late reports from Arizona, Massachusetts, and Washington D.C., and are subject to revision once the government reopens.
  • Despite the rise in continuing claims, the data suggests that job losses remain relatively contained, with no significant surge observed.

• Regional Fed Survey Data:

  • Troy Lutka from SNBC Neo Securities compiles a running series of jobs and inflation data from five different regional Fed surveys.
  • This data indicates an actual pickup in job growth, as shown by an upward trend in the orange line on a graph.
  • This observation aligns with earlier weekly ADP data, which also reported a rebound in job growth after a weaker September number.

Inflation Trends

• Regional Fed Survey Data on Prices:
  • The blue line in the regional Fed survey data, representing prices, shows a slight tick down but remains elevated.
  • This index, compiled by Lutka, generally tracks the CPI reasonably well, with both lines moving in tandem.
  • The data suggests an acceleration in prices that coincided with the implementation of tariffs.
  • While the overall increases in prices remain elevated, the rate of increase (indicated by the blue line) has flattened out, suggesting a moderation in price acceleration.

Data Reliability and Future Outlook

• Limitations of Alternative Data:

  • While valuable, this alternative data is not comprehensive and has not been extensively tested in real-time.
  • However, taken together, it provides enough information for investors and policymakers to feel confident that they are not missing a dramatic economic swing.

• Impact of Government Shutdown on Data Release:

  • Even if the government reopens, there will be a significant backlog in releasing official data.
  • Jobless claims are expected to be released weekly relatively quickly, as the Department of Labor is still partially working on this data.
  • The release of jobs numbers, particularly the November report, is contingent on the government reopening within the next couple of days. The October jobs report has already been missed.
  • The critical period for data release is the current two-week window.

• Development of New Data Methodologies:

  • Steve Leeman is collaborating with Troy Lutka to refine the regional Fed survey data into a more comprehensive and robust indicator of jobs and inflation.
  • This initiative aims to create a "keeper" tool, even independent of the shutdown, to better understand economic trends.

• Beige Book Insights:

  • The upcoming Beige Book, due in a couple of weeks, will likely incorporate insights from these alternative data sources.
  • This could provide a clearer indication of the economic tenor that the Beige Book will report.

• October Jobs Data Caveats:

  • There are indications of a better October for jobs, but a significant caveat remains: the impact of federal government layoffs.
  • Federal employees who were furloughed until October might have shown up as layoffs in the data, but the exact operational impact is still unclear.

Conclusion

The government shutdown has necessitated reliance on alternative data sources for labor and inflation statistics. While these sources provide valuable insights into a contained labor market and elevated but moderating inflation, they are not a complete substitute for official government data. The backlog of official data releases will be substantial even after the shutdown ends, but ongoing efforts to refine alternative data methodologies and the eventual incorporation of these insights into reports like the Beige Book will help policymakers and investors navigate the economic landscape. The impact of federal government employment changes on October's jobs data remains an important unknown.