Is the US Non-Farm Payrolls Distortion Set to Persist in December? | investingLive
The US Non-Farm Payrolls data, a critical economic indicator, is set to be released on the first Friday of the month, returning to its regular schedule. However, the November report was marred by data quality issues due to the prolonged US government shutdown, leading to a delay until mid-December.
As we anticipate the December report, it's essential to consider several factors that could influence the data.
One key aspect is the household survey response rate, which has been on a downward trend over the past two decades. The November report saw a sharp decline, reaching the lowest response rate ever recorded at 64%. The Bureau of Labor Statistics (BLS) attributed this to a composite weighting change, resulting in a larger standard error of the national unemployment rate by a factor of 1.06.
With the resumption of normal operations, we expect the household survey response rate to improve, along with any technical issues from the previous report. However, it's crucial to remain vigilant for potential complications in the December report.
Additionally, several factors could impact the employment landscape. JP Morgan highlights that despite the government shutdown ending during the household survey reference week, many federal employees were still classified as temporary layoffs. Reversing this in December could potentially lower the unemployment rate by approximately 4 basis points (bp).
The unemployment rate, which surged to 4.56% in November, is under close scrutiny. While the consensus predicts a slight improvement to 4.5% in December, the broader trend indicates a rise in unemployment as the labor market softens. This suggests that risks are skewed towards the higher side, and a reading closer to 4.7% could significantly influence the Federal Reserve's outlook.
Another factor to consider is the weather. Colder temperatures during the payrolls reference period in December might have a minor impact on the data, although this effect is typically more pronounced in January and February.
In summary, while the return to the regular schedule is positive, it doesn't guarantee the absence of challenges in the data. Investors and analysts should remain cautious and monitor these factors to gain a comprehensive understanding of the December report's implications for the US economy.
