Wednesday, June 26, 2024

US jobs market seen taking a hit from govt shutdown

US job growth likely slowed in October as a partial shutdown of the government delayed hiring and forced some workers to stay home, undermining the economy’s fourth-quarter growth prospects, reports Reuters. Employers are expected to have added a modest 1,25,000 new jobs to their payrolls last month, according to a Reuters survey of economists, down from a gain of 1,48,000 in September.
While the hit from the 16-day federal government shutdown will be temporary, it will undercut a labour market that was already struggling. Job gains slowed to an average of 1,43,000 per month in the third quarter after increasing by a fairly brisk 1,82,000 in the April-June period.
As a result of the shutdown, the unemployment rate is forecast to climb to 7.3 per cent from September’s nearly five-year low of 7.2 per cent.
Economists said the risk the government could default on its debt as lawmakers locked horns over the budget was another factor that may have created uncertainty that dampened hiring.
‘Businesses are unlikely to have moved ahead with hiring plans given that the US government was potentially on the brink of a default and the government shutdown,’ said Laura Rosner, an economist at BNP Paribas in New York.
Economists estimate the shutdown reduced payrolls by as much as 50,000 jobs last month. The Labour Department will release the closely watched report on Friday at 8:30am (1330 GMT).
The slowdown in hiring is likely to be concentrated in the private sector, where government contractors and others whose jobs depend indirectly on government funding were temporarily laid off.
In contrast, little impact is expected on government payrolls because the hundreds of thousands of federal workers furloughed received retroactive pay.
Some economists, however, think the consensus forecast might overestimate the actual private-sector damage. The Institute for Supply Management said on Tuesday that its gauge of the services sector survey increased in October, with services industry employment rising to a near-six-month high.
‘There was a little bit too much hype surrounding the calculation of the damage the shutdown would do to the economy,’ said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago.
‘The economy was weakening before the shutdown, so the shutdown may not have helped in that respect. (But) if we look at the services ISM, chances are we are not going to get the sharp slowdown that many are expecting.’
Still, even a payrolls count that beats market forecasts is unlikely to change expectations of slower economic growth in the fourth quarter, given that consumer spending slackened and business inventories rose in the July-September period.
Economists estimate the shutdown will shave as much as 0.6 percentage point off annualised fourth-quarter gross domestic product, through reduced government output and damage to both consumer and business confidence.

-With New Age input

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