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The partial federal government shutdown and the January employment report

10 January 2019 Ben Herzon, Ph.D.

Will we see any effects of the federal government shutdown in the January employment report? It depends on how long the shutdown lasts and whether (and when) furloughed employees receive back pay. The unemployment rate could be boosted by as much as 0.2 percentage point and payroll employment could be reduced by as much as 380,000.

The Household Survey Impact

If the shutdown continues through this Saturday (12 January), the unemployment rate is likely to be boosted by about 0.2 percentage point. This is because the 380,000 thousand furloughed employees (or about 0.2 percent of the labor force) are considered "unemployed, on temporary layoff" if they miss work for the entire reference week, which in this case is this week.

If the shutdown ends before this Saturday and the furloughed employees are back at work for even one day, they will be counted as employed "part-time for economic reasons, slack work or business conditions." That is, there would be no boost to the unemployment rate.

The Payroll Survey Impact

The 420,000 essential federal employees who are currently working without pay will be counted as employed in the initial print of the January employment report. This is because in the Payroll Survey, a person is accounted as employed if they worked or received pay for any portion of the pay period that includes the 12th of the month. Therefore, as long as they are working, they are counted as employed regardless of whether they are receiving pay.

For the 380,000 furloughed federal employees, as long as they eventually receive back-pay, they will eventually be counted as employed. Whether they will be counted as employed in the initial print of the January employment report comes down to timing. They will not be counted as employed if (i) they miss work for the entire pay period that includes 12 January, and (ii) they do not receive back-pay for the missed work prior to the cut-off date for preparation of the initial January employment report on 1 February, which is Monday, 28 January.

Conclusion

Because essential employees are working, albeit without pay, they will have no impact on the January employment figures. The furloughed employees potentially can influence the January employment figures depending on when they go back to work and when they receive back-pay.

  • If the government reopens this week, there will be no impact on the employment figures in either the Household Survey or the Payroll Survey.
  • If the government reopens next week, the January unemployment rate will be boosted by 0.2 percentage point, but there will be no impact in the payroll employment figures.
  • If the government reopens the following week (20 - 26 January), the unemployment rate will be boosted by 0.2 percentage point, and payroll employment may be reduced by as much as 380,000, depending on whether and the extent to which back-pay is arranged prior to 28 January.
  • If the government reopens after 28 January, the unemployment rate will be boosted by 0.2 percentage point and payroll employment will be reduced by about 380,000.

Posted 10 January 2019 by Ben Herzon, Ph.D., Executive Director, Macroeconomic Advisers by IHS Markit

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