The shutdown of the US federal government, which ended this week, has left markets without official unemployment data for September or October. As a result, investors have gone on a search for alternative indicators.
Among the many alternative indicators of the health of the US labour market is the survey of consumer expectations by the New York Federal Reserve. It tracks households’ expectations on the job market and provides clues on their perception of employment.
The findings of the latest survey (using mean probability) are:
- The likelihood that the US unemployment rate will be higher one year from now has risen by 1.4 percentage point to 42.5% – well above the average of the series (calculated from June 2013) of 37.4% and the 2024 average of 36.5%
- The perceived probability of losing one’s job in the next 12 months has fallen by 0.9pp to 14.0% – close to the long-term average and 2024 average.
- The perceived probability of finding a job if you lose your current job fell by 0.6pp to 46.8% (see Exhibit 1).
In a nutshell, this survey can be seen as another signal pointing to a softening US labour market (i.e., a higher unemployment rate), with downside risks (it is harder to find a job), but no imminent red alert.
Official data should start flowing again now that President Trump signed into law the ‘Continuing Appropriations… and Extensions Act’, ending the longest government shutdown in US history.
With the White House suggesting that October’s jobs report (which had been due in early November) is unlikely to be published, and September’s report to be made available only next week, there will not be much clarity on the state of the US labour market any time soon.
It is to be hoped that the fog will have lifted before the next interest rate meeting of US Federal Reserve policymakers. For the Fed, promoting maximum employment is a central goal and it has gained in prominence in its assessments in recent months. Without a clear picture of the labour market, the Fed’s hands could be tied, and a further rate cut might have to wait until 2026.
