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How the shutdown could affect the January jobs report

Updated 8:07 PM ET, Thu January 10, 2019

Washington (CNN Business) - Regardless of how well the American economy is doing, the January jobs report might be ugly.

If the government shutdown lasts through next week, nearly half of the 800,000 workers who have been furloughed will be counted as unemployed. The US Bureau of Labor Statistics bases its report on a survey of workers taken during the pay period that contains the 12th of each month. That's this Saturday, and many pay periods end on the 19th.

The employees who are working without pay will be counted as employed. But if the remaining furloughed workers end up being counted as unemployed, January could be the first month that jobs declined since September 2010.

And the decline could be comparatively large. The biggest seasonally adjusted, month-over-month loss during the Great Recession was in March 2009, when 802,000 jobs were wiped out. The largest monthly job loss on record, 1.97 million, was in September 1945 as America's wartime economy came to a halt.

The last prolonged government shutdown, in 2013, didn't discernibly affect the headline jobs number because most workers received wages for some part of the pay period that included the 12th of the month. It did, however, contribute to a rise in the number of people counted as unemployed and an uptick in the unemployment rate.

A January swoon, following December's report that employers added 312,000 jobs, probably wouldn't have a big impact on the market because traders would see it coming. The number would also presumably bounce back when the shutdown ends.

But it sure won't look good. The White House has already begun working to counter bad public perception.

"And so what we'll say, if we were to see that negative number: 'Well sure, it was negative, but if you adjust for the furlough, it looks like another plus-200 month or something like that,'" Council of Economic Advisers chairman Kevin Hassett told reporters last week at the White House.

The January jobs report, due out on February 1, may also reflect an expected decline in employment among federal contractors and workers in ancillary jobs — think people who work in sandwich shops or in daycare centers — that depend on federal employees going to the office.

In 2013, the Council of Economic Advisers estimated that the combination of a shutdown and uncertainty created by arguing over whether to raise the debt limit led to the creation of 120,000 fewer private-sector jobs over two weeks.

The overall economy is not expected to take a big hit from the shutdown, because workers are expected to be paid after the fact, when the government reopens. Congress will have to pass a law to make that happen, and President Donald Trump will have to sign it.

Correction: An earlier version of this article incorrectly reported the number of federal workers who could be counted as unemployed.


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