US Economic Data Uncertainty Drives Reliance on Private Sector Insights

US Economic Data Uncertainty Drives Reliance on Private Sector Insights

With a key labor market report delayed by the U.S. government shutdown, American investors are intensifying their search for private employment data, fueling concerns about the reliability of official economic statistics in the Trump era. The U.S. Bureau of Labor Statistics (BLS) not being able to release its monthly data on schedule Friday deprives global markets and the Federal Reserve of a key signal about the health of the American economy. This data gap comes at a crucial time, as investors try to understand how quickly the U.S. labor market is weakening and, against a backdrop of persistent inflation concerns, the Federal Reserve's stance on further interest rate cuts. "This is an extremely unusual period," said Torsten Sløk, chief economist at Apollo Global Management. "The labor market is weakening, but all other indicators are still strong... and now we are flying blind." This week’s government shutdown has added to the BLS's disarray, with decades of funding cuts having hampered data collection, while U.S. President Trump recently fired its director after the agency released a dismal jobs report. On Tuesday, Trump withdrew his nomination of E.J. Antoni for a new director after outside concerns that nominating a political ally could harm the agency’s independence. The turmoil at the U.S.’s most important economic statistics agency has pushed traders and economists to scramble for alternative data that can help them predict the Federal Reserve’s next move at rate-setting meetings this year. "In the absence of official data, what does the Fed rely on? This information is going to be very, very important to the market. The longer this shutdown lasts, the more important it is for the Fed to signal what data they are watching," said Edward Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments. The Federal Reserve relies on other sources, including the so-called “Beige Book,” a compilation of economic conditions it collects itself through interviews and questionnaires, released eight times a year. The most recent Beige Book in August painted a weak picture, with consumer spending “flat to down,” increased layoffs and hesitancy in hiring. The next Beige Book will be released in October. Private data providers are now gaining increased attention. Payroll processing firm ADP reported this week that private employers cut 32,000 jobs in September, the biggest drop in two-and-a-half years. "With hindsight, and given the benefit of revisions, ADP has proven to be fairly accurate," said Al-Hussainy. "ADP has been working with the Fed to give them weekly data. Its methodology is quite good, and they are getting feedback from the Fed as well." But economists warn that ADP’s anonymized payroll data cannot be compared to the BLS’s data. "You can’t rely on historical data while drawing on new, alternative data," said Nathan Thooft, chief investment officer at Manulife Investment Management. "You can’t look at the BLS data and then compare it to ADP data." Thooft pointed out that the market barely moved after this week’s dismal ADP report. Economists say a “stalled” labor market is also a reason for the dismal jobs data. The BLS’s latest JOLTS data showed layoffs remain near historic lows, while the quits rate has slid to its lowest level since the start of the year. The JOLTS survey covers about 21,000 establishments, from mom-and-pop shops to Fortune 500 companies. While it shows the unemployment rate still slightly above 4%, uncertainty surrounding Trump tariffs and immigration policies has led to a lack of fluidity in the labor market, which has concerned some economists. A healthy labor market typically shows both hiring and firing as companies adjust to changing conditions and technologies. Seeking more clarity, investors are also scrutinizing data from LinkedIn and Indeed. LinkedIn’s economic head Kory Kantenga said its hiring data tracks changes in member profiles and closely matches federal data, even down to individual industries. He said this also points to stagnation, but no obvious danger signals. "We see hiring gradually slowing, but not sharply slowing," Kantenga said. "The unemployment rate might tick up slightly because people are having a harder time finding a job, but we don’t think there is going to be a sudden, massive layoff." Indeed’s daily hiring-postings index tracks “help wanted” ads on one of the internet’s largest job boards, providing a near real-time look at who’s hiring. It, too, points to stagnation. After a brief rebound in August, Indeed’s hiring postings fell in September to their lowest level since February 2021. "The labor market might seem calm on the surface, but beneath the calm is a lack of dynamism," said Allison Shrivastava, an economist at the Indeed Hiring Lab. "This isn’t a matter of erring on the side of caution," she added. "It’s more like try not to do anything right now if you can help it." }