Weekly Economic Trends and Indicators
Among the federal government functions that were disrupted in October and early November due to the government shutdown was the reporting of economic statistics. The steady stream of data is like the hum in the background of American business—containing both useful signals and confusing noise that often goes unnoticed until it is suddenly missing.
The Constitution says nothing about collecting economic statistics, per se. Section 2 of Article I of the Constitution calls for an enumeration, or census, for the purpose of legislative apportionment. Yet in the very first year in which our constitution was in operation, James Madison (a representative who would later become president) argued in favor of expanding the census beyond a mere headcount, “marking the progress of the society, and distinguishing the growth of every interest,” and so that lawmakers “might rest their arguments on facts.”
Thus it has been for 230 years, that we have relied on the government to provide consistent, reliable, and unbiased facts and statistics. However, collecting data is difficult. The statistics are never as precise or accurate as we wish them to be (a fact that even Madison acknowledged in 1790), but through decades of research and improvement, our system of collecting and reporting economic data is among the best in the world. Even so, the private sector has made many important contributions to the dissemination of economic data. In times like this when government data is not available, private sector data can help temporarily fill the gap.
One of the most important and most cited suppliers of private labor market data is the ADP Employment Report. Many people are familiar with ADP as a payroll and human resources company with over 1 million clients and handling payroll for 1 out of every 6 workers in the U.S. With access to such a large amount of payroll data, they are in a position to issue estimates of total employment in the U.S. that are nearly as good as the government product. In fact, most analysts look at ADP’s numbers each month alongside those produced by the Bureau of Labor Statistics (BLS).
In October, ADP Research reported that private employment grew by 42,000—the first increase since July. Professional and business services, information, and leisure and hospitality lost jobs. This added fuel to the speculations that the job market is slowing. The way that the BLS calculates job growth includes estimations of businesses “birth and death” which may be less accurate near a turning point and may be subject to significant downward revision in times such as this. On Thursday, the BLS will release its own job growth numbers for October, nearly two weeks late. The BLS report will not include the unemployment rate as the household survey was not done with the government being shut down.
In an effort to have another estimate of the unemployment rate, the Chicago Fed recently began issuing their own estimate. For October, they estimated the unemployment rate to be 4.36%, only slightly above the most recent BLS report. This additional measure of unemployment provides a useful check on the headline number. However, it cannot yet replace the detailed results by state, county, and metro areas provided by the BLS.
Next week: Catching up on delayed government data
