The absence of the October 3 Bureau of Labor Statistics Employment Situation Report due to a federal government shutdown left economists without a key gauge of labor market health. Often referred to as the most anticipated economic release each month, this report typically offers critical insights into employment trends, inflationary pressures, and overall economic direction. Without it, analysts must rely on alternative data sources to assess the nation’s economic trajectory.
Recent GDP figures showed a 3.8% increase from the prior quarter, a number that initially suggests robust expansion. However, deeper analysis reveals that this growth was significantly influenced by statistical adjustments related to trade flows. In the first quarter, a surge in imports—driven by businesses stockpiling goods ahead of potential tariffs—reduced GDP by 0.6 percentage points, even though domestic economic activity remained stable. In the second quarter, the reverse occurred: a sharp decline in imports added approximately five percentage points to the headline growth rate. This shift transformed what would have been a contraction of about 1.2% into a reported gain of 3.8%, indicating that the strength was largely an artifact of accounting rather than real economic momentum.
Supporting this interpretation, private-sector indicators point toward a cooling economy. The ADP National Employment Report indicated a drop in private payrolls during September. While ADP data does not always align precisely with official BLS numbers, the downward trend adds weight to concerns about labor market softening. A separate estimate from the Carlye Group suggested only 17,000 jobs were added in the private sector last month.
Further evidence comes from the Institute for Supply Management’s surveys. The Manufacturing Index remained below 50, signaling ongoing contraction in that sector, with firms citing high borrowing costs and supply chain disruptions linked to trade policies. The Services Index dipped to exactly 50, marking its weakest performance since the pandemic and falling short of forecasts. This reading suggests stagnation in a sector that has been a primary engine of post-pandemic recovery.
Consumer spending continues to provide a stabilizing force. Despite declining confidence metrics, households—particularly higher-income ones—have maintained their purchasing levels, supporting economic activity. Yet this resilience may be fragile. A sustained weakening in employment or wages could prompt a pullback in spending.
In the absence of official labor data, the cumulative weight of these signals suggests a broader trend: the economy is decelerating but not collapsing. Manufacturing is weak, service-sector growth is stalling, and consumer demand, while holding steady, faces mounting risks. When the next official jobs report is released, it is expected to confirm these underlying trends, reinforcing the case for potential interest rate reductions by the Federal Reserve.
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The Economic Super Bowl Goes Dark
–Even without the numbers, signs are mounting that growth is fading n nThe first Friday of every month is a day that economic watchers eagerly anticipate. It’s the Super Bowl of all economic indicators — the Bureau of Labor Statistics’ (BLS) Employment Situation Report. This single report tells us more about the economy’s health than any other monthly release. It reveals whether the labor market is running hot or cold, whether inflation pressures might intensify or cool, and whether the economy’s next move is up or down. n nThe employment report comes from two surveys. The establishment survey provides the headline jobs number, whether companies are expanding payrolls or cutting back. The household survey gives us the unemployment rate. Together, these two components form the backbone of how we understand the nation’s economic momentum. n nUnfortunately, we didn’t get that crucial report October 3rd because of the federal government shutdown. No jobs number. No unemployment rate. n nWe do have some data released before the shutdown, along with several private-sector indicators. Collectively, they paint a mixed picture, but the weight of evidence continues to tip toward slower growth. n nLet’s start with the broadest measure, Gross Domestic Product (GDP), the economy’s scorecard. The most recent report showed growth of 3.8% from the prior quarter, a figure that looks quite strong at first glance. But as is often the case, it pays to look under the hood. n nDuring the first quarter, there was a surge in imports as manufacturers and retailers rushed to bring in goods ahead of potential tariffs. Because imports are subtracted from GDP, that surge artificially reduced GDP by 0.6%, even though the underlying economy was not actually shrinking. Pundits quickly seized on that number to fit whatever narrative they favored. n nFast-forward to the second quarter, and the pattern reversed. Imports fell sharply, the mirror image of the earlier spike, which mathematically added about five percentage points to GDP growth. That swing turned what would have been roughly –1.2% growth into a headline gain of +3.8%. In other words, much of the “strength” in that report came from the accounting effect of lower imports, not necessarily from genuine economic acceleration. n nSeveral private indicators reinforce that slowdown narrative. The ADP National Employment Report, which tracks private-sector payrolls, showed a decline in September. While the ADP and BLS reports often diverge month to month, the weakness in ADP’s data will likely strengthen the case for the Federal Reserve’s next rate cut. A private report out this week by the Carlye Group estimated payroll gains of just 17,000. n nMeanwhile, the Institute for Supply Management (ISM) released its twin surveys on manufacturing and services. The ISM Manufacturing Index remained below the critical 50 mark, signaling contraction. Manufacturers continue to struggle with higher borrowing costs and renewed supply chain uncertainty tied to tariffs. The ISM Services Index, which has been in expansion territory for nearly all of the post-COVID recovery, slipped to exactly 50, the lowest since the pandemic and below expectations. The index has been trending downward since late 2024, suggesting that service-sector growth is also losing momentum. n nIf there’s one consistent source of strength, it’s the American consumer. Despite dour headlines and shaky confidence readings, consumer spending remains resilient. Shoppers haven’t shut their wallets, particularly at the upper end of the income scale, and that spending has been a key driver of economic growth. n nStill, this resilience has limits. The one indicator that could quickly change sentiment is the employment report itself. A weaker labor market, fewer jobs and slower wage growth, would likely cause consumers to pull back. Without the BLS report, we’re flying partly blind. But the private-sector clues are increasingly pointing toward a softening labor market. n nEven without the government’s data, the broader picture is coming into focus; an economy that is cooling, not collapsing. Manufacturing remains weak, services are slowing, and consumer spending is steady but fragile. When the next jobs report finally arrives, it will likely confirm what these early signals are already telling us. The economy is moving toward slower growth, providing additional support for Fed rate cuts.