Government shutdown risk may trump jobs report
September job creation won’t mean much if budget showdown spurs shutdown
WASHINGTON (MarketWatch) — The U.S. jobs report usually commands Wall Street’s attention at the start of each month, but the budget standoff in Washington could steal the spotlight absent a speedy resolution.
Large swaths of the federal government could shut down next week barring a last-minute agreement. And the U.S. could even do the unthinkable — default on part of its debt — unless Democrats and Republicans compromise on a bill to raise the legal limit on how much the government can borrow. The Treasury could effectively run out of money in late October.
| date | report | Consensus | previous |
|---|---|---|---|
| Sept. 30 | Chicago PMI | 54.3 | 53.0 |
| Oct. 1 | ISM | 55.0% | 55.7% |
| Oct. 1 | Motor vehicle sales | 15.6 mln | 16.1 mln |
| Oct. 2 | ADP employment | 180,000 | 176,000 |
| Oct. 3 | ISM nonmanufacturing | 57.3% | 58.6% |
| Oct. 3 | Factory orders | 0.4% | -2.4% |
| Oct. 4 | Nonfarm payrolls | 180,000 | 169,000 |
| Oct. 4 | Unemployment rate | 7.3% | 7.3% |
Similar showdowns in the past have always been resolved, though in some cases the disputes have dragged on long enough to trigger temporary damage to the economy. The U.S. experienced a short but sharp slowdown in the summer of 2011 during the last standoff over the so-called debt ceiling.
“We saw in 2011 that it weighs on business and consumer confidence,” noted economist Ryan Sweet at Moody’s Analytics. “Hopefully it ends better than it did last time.”
While investors on Wall Street have grown increasingly concerned about the standoff in Washington, they for now appear to be taking it mostly in stride. “If an adverse political outcome does occur, even just a brief government shutdown, the financial pain could be swift because investors don’t appear to be positioned for it,” said Scott Anderson , chief economist at Bank of the West.
What’s up with jobs
The U.S. employment report for September, meanwhile, might offer a little drama of its own when it’s released on Friday. The economic calendar this week also includes auto sales and the closely followed ISM survey of manufacturers.
The net gain in hiring in September could post a surprisingly large pop if the sharp drop in jobless claims over the past month and business surveys are to be believed. Hiring intentions have risen in several recent polls of executives at large and small companies alike. Read more about questions concerning jobless claims.
There’s reason to be skeptical, though, and most economists are sticking to more conservative estimates. The nation is forecast to add 180,000 jobs in September, according to a MarketWatch survey. Wall Street will also watch closely to see if a mildly disappointing increase of 169,000 new jobs in August is revised up.
The unemployment rate has been trending lower because of a pickup in the pace of hiring and a decline in the number of people looking for jobs. People who stop searching for work are excluded from the official unemployment rate. The jobless rate stood at 7.3% in August and most economists believe it will remain unchanged.
Other parts of the employment report sure to draw scrutiny are hours worked and the so-called participation rate. The number of hours people put in on the job rises when the economy strengthens and falls during bouts of weakness. The participation rate reveals the percentage of people 16 and older seeking a job. It fell to a 35-year low of 63.2% in August, a reflection of the ongoing struggle of the U.S. economy to produce jobs fast enough to draw more people into the workplace. http://www.marketwatch.com/story/capitol-game...2013-09-29
