Hiring data suggests an unusual economic dynamic at play

• Those indicators signal that an unusual economic dynamic persisted last month: Employment is barely budging, even as business investment and consumer spending look strong.

The big picture: As the government shutdown drags on, so will the delay in key indicators — including the monthly jobs report.

• Private sector data can offer some clarity about economic conditions in any given month, though without the massive samples and long track record of government data, which economists consider the gold standard.

Driving the news: In the absence of that data, the ADP report was this week's headliner. It showed the economy shed 32,000 private sector jobs in September, while a massive revision swung August's previously reported job gains to a slight loss.

• Economists anticipated the labor market added about 55,000 jobs last month, picking up from the 22,000 added in August (though that number is subject to a fresh revision in the postponed report).
• Similarly, data from job listings site Indeed shows that as of Sept. 26, overall job postings were down 2.5% from a month earlier. Its wage tracker, based on advertised salaries in job postings, shows a steady slowing in wage growth.

Zoom in: There were other clues about the labor market's health in closely watched surveys released this week.

• The ISM said that both the service and manufacturing sectors continued to shed jobs, though notably at a slower rate than in August.
• Roughly 64% of manufacturers — a sector walloped by tariffs — said that "managing head count is still the norm at their companies, as opposed to hiring," ISM said.

Reality check: Most private sector labor reports are similar to the payroll data usually captured by the government's survey of businesses.

• But private-sector data says very little about the other side of the job market equation: labor force size and the unemployment rate, which is usually supplied by the government's survey of about 60,000 households each month.
• Those household measurements are especially critical at this moment, when economists are unsure whether weak jobs growth is a result of an immigration crackdown that might be shrinking the workforce.
• It's also critical for clues about whether the "low-hire, low-fire" dynamic is starting to break with a pickup in layoffs.

The intrigue: A real-time estimate by the Chicago Federal Reserve based on a mix of public- and private-sector data finds that the unemployment rate would have held at 4.3% in September.

• Goldman Sachs estimated that initial jobless claims were about 224,000 in the final week of September, an estimate the bank arrived at by combining state-level released figures and adjusting them for seasonal factors.
• That would be roughly in line with the previous week's data, with little signal from the claims data of a pickup in layoffs.

The bottom line: The government data delay increases "the uncertainty around the health and trajectory of the labor market at a time when policymakers are looking for clues that the labor market is tipping into decline," Glassdoor chief economist Daniel Zhao wrote Friday.

If the shutdown proves protracted, it will create an unenviable situation for Fed policymakers as they head into their next policy meeting at the end of the month.

• Their fog of uncertainty would become that much foggier.

Yes, but: Available information points to moving forward with a likely interest rate cut due to the softening labor market — even though the data affirming those plans is increasingly coming from less reliable sources than usual.

Between the lines: At their last policy meeting, a majority of Fed policy committee members indicated that they see at least two more rate cuts this year as likely to be justified — with only two meetings remaining in 2025.

• On the one hand, the absence of government data to ratify the assessment on which those projections are based is problematic.
• But private-sector labor market data provides supporting evidence that the downshift in jobs continues.
• That offers some reassurance that there hasn't been a dramatic reacceleration that would change the rate-cutting plans.

Of note: Chicago Fed president Austan Goolsbee, appearing Wednesday on public radio's Marketplace, noted that while there are many private-sector sources of labor market data, there are fewer non-government sources of inflation data.

• "If we aren't going to have those, it's problematic," Goolsbee said.
• The Fed is entering a period of trying to figure out whether a transition in the economy is underway, and "if you're not going to get the data, it's just that much harder."