No Jobs Friday: The Sequel

Episode Summary

Executive Summary: The episode examines an unusually data-poor Jobs Friday amid the U.S. government shutdown, using private and state sources to infer that labor-market conditions are weak but not collapsing: layoffs remain low, hiring is near stall speed, and unemployment is edging higher. The hosts also debate AI-related layoff claims, shutdown impacts, forecast methods, tariff inflation, and the likely duration of the shutdown.

Main Topics: Alternative labor-market data amid the shutdown (Priority: 5/5): With BLS reports unavailable, the hosts rely on UI claims, Challenger layoff announcements, ADP, Revellio Labs, and Indeed to infer the state of employment and unemployment. Layoffs remain low but announced cuts are rising (Priority: 5/5): Weekly claims are still below recession-warning thresholds, but Challenger reported the highest October announced job cuts since 2003, driven by cost cutting, AI, and government-related factors. Hiring is weak and close to zero net job growth (Priority: 5/5): ADP and Revellio point to modest or negative private payroll growth, weak job postings, and soft wage growth, suggesting the labor market is near stall speed rather than expanding meaningfully. Government shutdown and federal workforce effects (Priority: 5/5): The conversation explores why federal workers laid off or furloughed under DOGE/shutdown dynamics may not be showing up strongly in claims, and how the shutdown is affecting economic activity and data collection. Forecasting process and the role of AI (Priority: 4/5): The hosts explain how Moody’s models combine cleaned data, econometrics, scenario generation, and judgment, and discuss AI as a productivity enhancer rather than a replacement for forecasters. Tariffs, inflation, and expectations (Priority: 4/5): They debate whether tariffs are a one-time price-level shock or a more persistent inflationary force, with the consensus leaning toward one-time pass-through unless demand and expectations re-accelerate. Listener questions and stats game (Priority: 3/5): They answer audience questions about how forecasts are built, data lags from the shutdown, and the interpretation of tariffs, while also playing the podcast’s statistics game with labor-market and sentiment indicators.

Key Arguments: Weekly UI claims remain too low to signal recession risk; below 250,000 is considered comfortable, while 300,000 would be alarming. Challenger’s surge in layoff announcements is notable, but announced cuts do not reliably translate into immediate claims or unemployment increases. AI may be used as a justification for layoffs, but the hosts think it is still early and more likely affecting hiring decisions than causing large direct job losses. ADP and Revellio together imply only small private-sector job growth, and after accounting for federal payroll declines, total payrolls may have fallen in October. Job postings and wage growth from Indeed suggest weak labor demand, consistent with a stalled labor market. The labor market may be able to muddle through at near-zero growth, but the shutdown could act as a shock that pushes the economy into a worse outcome. Tariffs are mostly viewed as a one-time price-level increase, not a sustained inflationary process, unless demand strengthens and expectations become unanchored. AI is presented as an augmenter to forecasting—useful for data cleaning, scenario generation, and broader coverage—rather than something that replaces human judgment. Current forecasts rely on a combination of cleaned government data, private datasets, econometric models, and scenario analysis across thousands of variables.

Data Points: UI claims (week ending Nov. 1): 229,000 - State-level aggregated claims rose by 10,000 from 219,000 two weeks earlier; federal workers not included in the main count. Estimated federal UI claims excluded from aggregate: 8,000 to 10,000 - Matt Collier estimated this additional federal-worker component for the same week. Challenger announced job cuts in October: 153,000 - Highest monthly announced job cuts since 2003. Challenger layoff-announcement reason #1: Cost cutting - Most common reason cited for announced cuts. Challenger layoff-announcement reason #2: Artificial intelligence - Companies cited AI as reducing payroll needs. Challenger year-to-date DOGE-related cuts: Over 200,000 - Job cut announcements directly attributed to DOGE. Challenger downstream DOGE effects: About 25,000 - Additional announcements attributed to downstream effects from DOGE. ADP private payrolls in October: +42,000 - Private-sector employment increased modestly after a prior monthly decline. Revellio total nonfarm payrolls in October: -9,100 - Headline total payroll estimate including government; implied government payroll decline around 20,000. Implied Revellio private payrolls: +13,000 - Derived by reconciling Revellio’s total with government employment losses. Moody’s implied total nonfarm payrolls for October: -15,000 - Forecast based on averaging ADP and Revellio and adjusting for federal job losses. Moody’s implied private payrolls: +28,000 - Average of ADP (+42k) and Revellio private estimate (+13k). Indeed job postings: Lowest since 2021 - Signals weak labor demand. Indeed wage growth: 2.5% y/y - Below current inflation, indicating soft wage pressure. Unemployment rate (Canada): 6.9% - Used in the stats game; down from a recent peak of 7.1%. Michigan sentiment by party: Democrats 33.2, Independents 45, Republicans 91.9 - Shows a wide partisan gap in consumer sentiment. Shutdown duration: 38 days and counting - Longest shutdown in U.S. history at the time of recording. Predicted shutdown duration from markets: 48 days - Prediction markets expected the shutdown to last longer. GDP growth forecast for Q4 2025: About +0.5% annualized - Assumes shutdown ends before Thanksgiving; longer shutdown could push the quarter negative. ISM employment indexes: Below 50 in both manufacturing and non-manufacturing - Indicates contraction in headcount across sectors. SOM rule threshold: Unemployment rate up >0.5 percentage point on a 3-month average basis - Historical recession signal referenced by the hosts.

Pivotal Quotes: "We’re going to make it a Jobs Friday." — Mark Sandy / group: Opening the episode amid missing official BLS jobs data due to the shutdown. "I think it’s a one-time jump in prices." — Chris Torites: On why tariffs are more like a tax and not necessarily a persistent inflation driver. "I worry about it in combination with other things going on." — Marissa Di Natale: On how the shutdown, weak labor market, and reduced federal support could push the economy over the edge.

Implications: Listeners should expect a soft labor market with low layoffs, weak hiring, and slowly rising unemployment. Shutdown-related disruptions may worsen conditions and delay key data releases, while tariffs and AI remain important but uncertain macro forces.