Knight Investment Limited – What to Watch in the Markets Friday – US Jobs Report
The government shutdown is over, for now. After running for 35 days, many are now anxiously waiting to see how the longest partial federal shutdown in U.S. history affected the labor market during its run.
The 800,000 furloughed workers that were asked to work without pay during the shutdown will be counted as employed in the establishment survey. And the 380,000 furloughed that didn't work and were not paid will be counted as unemployed in the household survey.
"The partial federal government shutdown will have a mixed impact on the January report, as each survey treats furloughed workers differently. In the establishment survey–nonfarm hiring, earnings and hours worked–furloughed workers will count as employed given their back pay is guaranteed. In the household survey–household employment, unemployment, labor force–furloughed workers will not be counted as employed (classified as unemployed on temporary layoff)," Knight Investment explained in a note on Thursday.
A check on the private-sector payrolls will be a crucial indicator as to how much of a material impact the shutdown had on the economy. 213,700 is the average added by private employers last year, so if the number remains close to the average, it will illustrate that the impact of the shutdown was minimal. However, if the number falls dramatically, that would indicate that there was a much less painful impact.
Economists are also expecting the unemployment rate to remain unchanged from December at 3.9%.
Additionally, average hourly wages, a key inflation gauge, will be in focus. Economists are projecting that average hourly wages jumped 0.4% from December and 3.2% from last year.
"Another strong print for payrolls and average hourly earnings would keep the [Federal Open Market Committee] on course to eventually raise rates twice more this year. A significant downside miss, however, would add support to the view that the FOMC needs to hold off on further rate increases longer than the committee currently anticipates,"
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