How the Government Shutdown Will Ding the Employment Report

The 35-day closure will pump the jobless rate up to 4.1% for January, RSM’s Brusuelas says.

The US has been riding a good-news tide of rising employment and dropping joblessness for some time. Thanks to the recent 35-day partial government shutdown, that’s about to be reversed, at least temporarily.

That’s the projection of RSM chief economist Joe Brusuelas, who expects the national unemployment rate to rise to 4.1% from 3.9% in December. When the Bureau of Labor Statistics issues its numbers on Friday, he wrote in a research report, that will mark the first net loss of jobs since September 2010, a full 99 months ago.

The 380,000 federal workers who didn’t report to work will be classified as unemployed during the month, but those who worked without pay, some 420,000, will be counted as employed, he wrote.

The last big shutdown, 21 days stretching from the end of 1995 to the start of 1996 resulted in only 13,000 lost jobs, by BLS calculations, he said.

What about long-term harm to the economy? Not so much. “Our research at this time does not indicate permanent damage to the labor market,” Brusuelas indicated. But he tempered that assessment with a warning that government contactors who were cut loose may suffer a shakeout. Just how much will show up in later monthly job reports, he added. 

Average wages shouldn’t be hurt too much, he went on—up 3.2% from the year before, or 0.3% over the month. That’s in keeping with the three-month average of 3.3%.

Brusuelas cautioned that investors may overreact to the higher jobless rate. The greater truth, he contended, is “the underlying growth trend in the domestic labor market, which is still stout, albeit slowing.”

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