US Jobless Claims Analysis Amid Government Shutdown: A Closer Look

Jobless Claims Estimates Amid Government Shutdown

Economists at JPMorgan Chase and Goldman Sachs estimated on Thursday that the number of Americans filing for unemployment benefits last week had decreased, but due to sluggish hiring activity, many are still stuck on the unemployment rolls. They calculated that seasonally adjusted initial claims fell to 217,000 for the week ending October 11, down from 235,000 the previous week. As a result of the political gridlock between Republicans and Democrats in Washington, the partial US government shutdown has now entered its third week, resulting in a complete suspension of the collection, processing, and publication of official economic data. However, states are continuing to collect claims data and submit it to the Labor Department database, which is still accessible. Economists are using unadjusted initial claims data, along with seasonal adjustment factors released by the government earlier this year to provide estimates.

Data Collection Challenges

Data for Arizona, Massachusetts, Nevada, and Tennessee were unavailable. "Our estimate assumes that initial claims in Tennessee, Massachusetts, Arizona, and Nevada—which were not present in the Labor Department’s data today—were in line with recently published figures," Goldman Sachs said in a report. "We used the low and high end of claims in these states this year to arrive at a range of 211k to 225k." The Labor Department uses a similar method when it is unable to obtain data from certain states in a timely manner.

Labor Market Analysis

"The latest initial claims data look pretty good, suggesting that layoff rates remain low, and changes in unemployment are modest," said Abiel Reinhart, an economist at JPMorgan Chase. Federal Reserve Chair Jerome Powell said this week that "available evidence suggests that layoffs and hiring are both remaining at low levels, and that households' perceptions of job opportunities and businesses' perceptions of hiring difficulty are both continuing to decline." Initial jobless claims are still within the range that prevailed before the government shutdown. Although the government shutdown caused thousands of federal contract workers to lose their jobs, the data did not show a significant spike. Hundreds of thousands of federal employees who have been forced to take leave are applying for benefits through a separate program, data for which has not yet been released. Economists say that the labor market remains stuck in a state of "no hiring" and "no firing." The Federal Reserve’s latest “Beige Book” report stated that labor demand was “generally weak” in recent weeks.

Small Business Labor Market Slowdown

A Bank of America Institute survey on Thursday found signs of a slowdown in the small business labor market. Its alternative hiring measure based on Bank of America small business payments data declined in September. The report also noted that the number of businesses with planned payrolls (which is seen as a signal of actual job creation) has fallen below pre-pandemic normal levels. Small businesses have long been a major driver of job growth. Economists say that US President Donald Trump’s trade and immigration policies, and the increasing prevalence of artificial intelligence, have reduced the demand for workers and labor. JPMorgan Chase estimates that seasonally adjusted continuing claims (which is seen as a proxy for hiring) held steady at 1.927 million for the week ending October 4. Goldman Sachs estimates so-called continuing claims were 1.917 million. The unemployment rate rose in August to 4.3%, the highest it has been in nearly four years, and the elevated continuing claims suggest that the situation has not improved.

Potential Long-Term Effects

The labor market continues to show signs of resilience, but it is important to monitor future developments. An extended government shutdown could have a greater impact on economic data, and uncertainty could cause a further slowdown in hiring. In addition, the increased use of artificial intelligence may have a significant impact on the demand for labor in various sectors.