Shutdown and its jobs and trade impact

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HotForex Market Review
HotForex Market Review

US Equities are modestly weaker but have trimmed earlier declines amid risk-off trading conditions. The small dip in jobless claims (despite the shutdown) and uptick in the Philly Fed index helped put a floor under stocks. The USA30 is down 70 points, the USA500 is lower by 7 points and the USA100 has declined 10 points in pre-market trading.

The 3k initial claims drop to 213k in the BLS survey week extended the 17k drop to 216k in the week of New Year’s, after a 12k rise to 233k in Christmas week that also marked the first full week of the shutdown.

Today’s 213k BLS survey week reading similarly lies below recent readings of 217k in December and 225k in November, but just above October, September, and August. Today’s reporting period extended through day 22 of the government shutdown, with little apparent lift from laid off private contractors. If workers get paid later, as expected, they must refund the money, so federal workers are seemingly assuming a short shutdown that doesn’t make filing worthwhile.

January nonfarm payroll estimates will need revision if the shutdown extends past Saturday and there is no provision made for back-pay to those who are “not working” and “not receiving pay,” hence prompting a 380k federal employment drop. An additional 420k workers not receiving pay will likely be counted as working since they are at work and are highly likely to receive back pay.

Meanwhile,  Canada’s trade data is also impacted by the US shutdown, as Statistics Canada announced that the monthly trade report will be put on hold due to the shutdown of the U.S. government. The agency explained that they “will not receive data on Canada’s exports to the United States for the duration of the shutdown.” Given that Canada’s exports to the U.S. account for 75% of Canada’s total exports, Statistics Canada rightly concludes that trade statistics missing that information would “have limited use as a current economic indicator.” The December trade report, scheduled for February 5, will not be released.

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Andria Pichidi

Market Analyst

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