What Happens to Jobs Data If The Government Shuts Down?

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00:00As a shutdown of the U.S. government could stop economic releases and make for a foggy U.S. economy

00:05and perhaps one that's even foggier, which may just make all of our jobs trickier. Fortunately,

00:11we've got Stuart Paul with us. He's Bloomberg Economist, U.S. and Canada Economist. He joins

00:15us here in the studio. They will suspend all operations. That's a quote. The U.S. Bureau of

00:21Labor Statistics and cease all active data collection activity should the federal government

00:25shut down. What does that mean for you? What does that mean for us? Well, it makes for a lighter

00:29work schedule for me, less data to react to and less data to forecast. What's interesting

00:34is that in the absence of this federal data, all eyes are going to be on the data sets that

00:40we're not getting from the BLS. So the ADP data, for example, carries all the more importance

00:46because we're not getting it from the federal government. We're getting it from ADP. If

00:50that's the insight that we have into the labor market, if that's the data that's available

00:54to the Fed to make their decisions, we're going to need to rely on those alternative data sets.

00:59But what does it mean for me from an economic perspective? What do we know about government

01:04shutdowns more broadly? Well, for each week that the government is shut down, that typically

01:10shaves off about a quarter percentage point from the annualized pace of GDP growth during

01:16the quarter. So if we're shut down for four weeks, that shaves off a full percentage point

01:22from fourth quarter growth. There's a rebound effect in the subsequent quarter. Typically, what's

01:28a little bit tricky is that this is happening right at the beginning of the fourth quarter.

01:31So if we were to have a three week shutdown, which is about the longest shutdown we've

01:35ever seen, we would still have plenty of time in the fourth quarter to make up those losses.

01:41And it could just end up being a wash when we finally do get data releases when everybody

01:46returns to work. All right. So if it's a short shutdown, if it's three weeks, we're going

01:51to kind of be OK. We're just going to kind of figure our way through. That's right. Yeah, I think

01:54that everything's going to be OK. I think that folks who are furloughed are going to go to the

01:59all day happy hours around DuPont Circle. I think that it's going to be tense negotiations. But I do

02:06want to keep in mind that a three week shutdown is a pretty long shutdown in the context of the

02:11quarter, though. It's not that big of a deal. What is a little bit tricky is that the Fed would

02:16be, in a sense, driving blind because it doesn't have the official statistics that it really prefers to

02:22use and the data that it likes to refer to for communications policy. Right. It's always

02:28referring to his preferred inflation gauge, the core PCE measure. It's always referring to the

02:33unemployment rate to talk about the balance of labor supply and labor demand. If we don't have

02:37those statistics, official communications becomes difficult. But in terms of actual economic activity,

02:43in terms of actually knowing where we are within the business cycle, for example,

02:46even a three week shutdown is relatively brief. Is the Bureau of Labor Statistics, the Labor Department

02:53or Commerce, I'm thinking about the data that goes into all of the monthly jobs reports. Are they at

02:58risk of losing employees, though, in a government shutdown? There is some concern that if there is a

03:03shutdown, it kind of emboldens the executive branch to maybe make more cuts, mass firings. There's

03:10certainly been some warnings along that line. Yeah. So it's definitely possible. Department of Labor

03:14has about 13,000 employees on its payrolls. In the event of a shutdown, that ends up getting paired

03:19back to about 3000 employees, only one of whom, according to the Department of Labor, the Department

03:26of Labor's contingency plan, only one of those employees would remain at work in the Bureau of

03:31Labor Statistics. Wow. So in terms of data collection, it's going to be a major problem that we could end up

03:37seeing some pretty choppy labor surveys, especially for October if the shutdown continues through

03:44the reference week, the week containing the 12th of the month, could be very choppy. And if we were

03:51to see, as Carol said, en masse firings, as President Trump has threatened, that would materially result in

03:57a reduction in the number of folks on government payrolls and perhaps an increase in the unemployment

04:01rate up to four and a half percent. Well, what about, can I just to follow up, but if we lose people

04:06at the Labor Department, I mean, in terms of the data collection, like that's at risk too. Absolutely.

04:11So it's really going to be a matter of what data collection looks like through the reference week

04:15and as many issues as we've had with data quality and estimating nationwide aggregates from the surveys

04:23that are sent out every month, it's going to be problematic. And we're likely going to end up seeing,

04:27again, revisions that have been so frustrating.

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