A Fuzzy First Economic Indicator on the Shutdown
We're not going to see the September nonfarm payrolls report until this whole government-shutdown mess is resolved. I'm following the data on initial unemployment claims, instead. They're a timely indicator -- the latest data are for last week. And they're quite informative, as they're based on a complete count of new applications for unemployment insurance, rather than a noisy survey.
The latest survey suggests good news, with initial claims for the week ending Sept. 28 of 308,000. Thus, over the past four weeks, initial claims have averaged 305,000, a distinct move down from an average of 332,000 over the previous four weeks. Moreover, initial claims are now firmly back to their pre-recession levels, and indeed, their lowest level since May 2007. Unemployment remains elevated not because people are losing their jobs at high rates, but because the unemployed are still finding it difficult to find work.
All of this makes me confident that the recovery still had reasonable momentum, heading into the government shutdown. But even these rather timely data don't tell us anything about the effects of the shutdown, because they are for the week prior.
If you're like me, you're on the edge of your seat waiting to see how the economy responds to the current budget battles.
Unfortunately, the initial claims data are about to give some very hard-to-interpret signals. The problem is that somewhere around a million public servants have been furloughed, and an unknown number of them may end up applying for unemployment insurance. (If they are eventually retroactively paid for the shutdown, they'll have to repay their unemployment insurance, so nobody knows how many will end up filing claims.)
The good news is that it's possible that eventually the Labor Department will be able to tell us how many of the furloughed federal workers distort the headline numbers. The bad news is that it will take another week or two until they can sort this out.
All of this means that we're not going to know much about the impact of the current budget battles on labor for a few weeks yet. Ironically, a direct effect of the current budget battles is that they limit our ability to track the broader economic effects of, you guessed it, the budget battles.
(Justin Wolfers is a Bloomberg View columnist. Follow him on Twitter @justinwolfers.)