Labor Market Metrics in a Shutdown 10/1/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Midnight came and went. The government is shut down. Punchbowl's Jake Sherman. I just don't see any situation in which Republicans are going to negotiate right now. On what's next for members of the U.S. Senate who may just keep voting on the same thing over and over. And the tipping point is exhaustion. And the high drama on Capitol Hill. There's concern from Democrats and glee from Republicans. It's so crazy. Then, with no government, no government data? The last jobs report that may matter for a while? Payroll company ADP's chief economist Neela Richardson joins us with her number.

0:47There has been a slowdown in the hiring momentum from the beginning of the year to where we are now. Plus, antitrust allegations against the biggest names in real estate scrolling. What's Warren Buffett's gray line? Never ask your barber if you need a haircut. And Walmart says keep your red dye number whatever to yourself. I don't think it would taste as good. You're going to be forever tainted, but this is about saving the new generations. I know. You're a lost cause. I know. It's Wednesday, October 1st, 2025. Squawk Pod begins right now. Stand Becky by in three, two, one. Cue it, please. Good morning, everybody.

1:27Welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. And here we are. Today is the first day of the rest of your lives. The major averages, though, for the third quarter, yeah, that was a sight to see. The Dow was up by 5.2 percent. The S &P was up by 7.8 percent. And the Nasdaq was up by more than 11 percent. Then you had the Russell 2000. That's the small cap index. It was up by 12 percent and it saw its best quarter in a little under two years. Treasury yields this morning are, well, the 10 year is actually a little higher.

2:03It's at 415, the two year at 3.6 percent. We do have a lot of questions about what comes next. And that's where you could be into some issues. We're going to try and look through some of these data points today. On this vote, the A's are 47, then the A's are 53. the 60-vote threshold having not been achieved, the bill upon reconsideration is not passed. Democrats may have chosen to shut down the government tonight, but we can reopen it tomorrow. All it takes is a handful of Democrats to join Republicans to pass the clean, nonpartisan funding bill that's in front of us. In time, the U.S. government now officially shut down.

2:44This is after federal funding lapsed at midnight, 12.01. Joining us now with the latest, trying to understand what happens next. Jake Sherman is Punchbowl News' co-founder. He's the NBC News and MSNBC political contributor. Good morning to you. So the question is, what does come next? What does come next, Jake, at this point? It's a good question. I mean, Republicans are pretty insistent that they're not going to cave, and they feel like they have the upper hand. They have passed a clean funding bill to extend funding until November 21st. Democrats effectively want the extension of these enhanced COVID enhanced premium subsidies for Obamacare.

3:22They're not going to get that. Republicans are not going to cave. And we saw last night, Andrew, that more Democrats voted, two more Democrats voted for the clean CR when Republicans put it up. So John Thune is going to go to the floor today and over the weekend, Friday, Saturday, and he's going to keep putting up this bill and hope that more Democrats fold. And I think that's what's going to happen. There's not going to be a deal. I mean, the deal that's going to take hold is the deal that's already on the table, which is extend government funding for seven weeks and have this fight again in seven weeks or have some sort of fight over the next seven weeks.

3:56And I'll just add this, this what Democrats are demanding here, the extension of these enhanced tax credits for Obamacare. Republicans are not for that. This is not like an appetizing. Usually you shut down the government because you want there's something that you want that you think the other party will be interested in. Here, Republicans just plainly aren't interested in that. So I think this fight is going to end in the next week or 10 days, and then it's going to be rejoined again over the next seven weeks. But what is going to be the tipping point? What is the pressure point, and do the Republicans have to offer anything?

4:32Can the Democrats somehow walk back from this and just say, oh, well, would they do this? We're not doing this. Would they do this if Schumer didn't acquiesce, Jake? Would they? Are there guys that would split? I mean, I guess a couple already did, but would they split off from from the minority leader? And what would that do to Schumer? That's even worse in terms of, you know, primary challenges if he can't control his fellow Democrats. Could that happen where you get to 60 and he still says don't do it? Well, you bring up good questions, Joe, and I'll say a few things. Number one, And I don't think it's guaranteed that Schumer runs again.

5:10I think he's not up until 2028. So like a primary challenge, I think, is is obviously what people are talking about. I don't think that really matters. Now, listen, it does. It's a leader. It does impact his standing in the Capitol vis-a-vis how what kind of power he has, what kind of power to control his members that he has. I think that's important to think about. Now, you are seeing fraying around the edges. Senators are generally more free agents than members of the House. Just generally speaking. They have more power. They have more sway over the process. I don't think Republicans have to offer much.

5:43And the president and J.D. Vance and Mike Johnson and John Thune have basically said, we're not going to offer anything. And this is the deal that's on the table. We're happy to have the conversation about these subsidies, about these tax credits, but not in the context of government funding. Now, I don't want to you can't we can't let Republicans get on their high horse here. They have forced conversations similar to this during shutdowns. They have tried to hold the government hostage on many occasions and successfully did twice. So they're not better than this. But I just don't see any situation in which Republicans are going to negotiate right now.

6:22I mean, Thune has momentum. Catherine Cortez, Mastro of Nevada, Angus King of Maine, and John Fetterman of Pennsylvania all have voted now for a clean CR. So we'll see if that number grows the next time. And the tipping point, Andrew, is exhaustion. I mean, you could argue back and forth the economic impact of a shutdown. I think it's over a week. It's relatively minimal. But as time goes on, it grows and grows. But people get exhausted of not having the government open, of services not being available, et cetera, et cetera. And I think that pushes people to reopen the government. Hey, Jake. Yesterday we had Johnson on, Mike Johnson on, the House Majority Leader.

7:06Speaker. Speaker Johnson. And then we had on Hakeem Jeffries, the minority leader. And it was kind of crazy to watch what the two were saying. Johnson laid it out. He said, this is a clean CR. They want to give health care to illegal immigrants. Hakeem Jeffries came on and said, those are lies on both counts. You just called this a clean CR. Where do you come down on the rest of these issues and the rest of how this kind of shakes out. They don't want to give health care. It is a clean CR. Like I would be happy to whack Johnson if I if there was something to whack him over here. This is a clean CR.

7:39This is they are not playing games for the first time. Republicans are not. This is a relatively clean CR. It doesn't include the priorities that Democrats want, but that does not mean it's not clean. That's number one. Number two, Democrats really don't want to give health care to illegal immigrants as part of this process. It's illegal for immigrants to get these health care benefits. You could argue that there's fraud and they do get these health care benefits. That's not what Democrats are trying to do. What Democrats are trying to do is they're trying to roll back some of the cuts and some of the provisions from that one big beautiful bill.

8:11It's not fraud. It's not fraud. They do it under the light of day in California. 1.6 million under the light of day. It just happens to be state funds that are re it's fungible. They are federal dollars. Let's let's accept that argument for just it's just not fraud. It's it's done under the light of day through loop lines, which were close. Let's accept that argument. OK, Democrats in this process are not trying to give health care to illegal immigrants. They're not trying to make it legal to give federal dollars. So that's true. But federal funds are ending up covering illegals health care. Millions of that.

8:50Fine. That's not what Democrats are trying to do in this process is my only point. Whether they do in California or not, I am an expert on many, many things. Many other states. Yes, I understand. Democrats are not trying to do that in this process. Now, the main disagreement here is over these tax credits for Obamacare, which Republicans rightly argue were created during covid. I will add this. There are a number of Republicans, not a lot, a number of Republicans who will want to extend those tax credits. And it's going to be a problem for Republicans if you see health care premiums jump 75 percent.

9:31I understand Democrats put these in place, but Republicans are now in charge. And there's going to be a big effort to try if the government reopens, when the government reopens. There's going to be an effort to try to reinstate or tweak some of these subsidies to put them back into place. OK, I think we're going to leave it there, Jake. There's not much there's not much to know at this point. A lot of speculation. We should know the government is shut down and it will reopen at an indeterminate date we don't yet know. Jake, the next thing is if we have mass firings. That's right. I think the mass firing is the next piece of this.

10:10I'll add to this very quickly that the White House has said, Trump said yesterday he could cut benefits. He could cut programs. They could, CBO said yesterday, 750 ,000 people could be furloughed. And there's concern from Democrats the administration will use this opportunity to conduct mass layoffs. There's concern from Democrats and glee from Republicans. It's so crazy. There are a lot of people that would love that. Welcome to America, right? Yeah. Cheese will be next. Okay, so we won't have a jobs report from the Bureau of Labor Statistics this week, given the government shutdown. But we do have data.

10:49The ADP private payrolls report, it is not a replacement, but it does help paint a picture of our labor market. What the Fed cares about when it comes to inflation is the extent to which the labor market can be a source of inflation. ADP's Neela Richardson explains her numbers and our economy. Is that consumer spending strong enough and broad-based enough to support job growth? We know it's supporting economic growth, but is it supporting labor market growth? Right now, we're not seeing it. Squawk Pod will be right back.

11:27Welcome back to Squawk Pod from CNBC with Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Joined now by our economics reporter, Steve Leisman. Stand by Joe. Here's Mike. Here. You read any of the, you know, market analysis today, stocks down on government shutdown. I mean, it's a half percent or something. It's not a lot. But certainly the conjecture, Steve Leisman, is that this time, usually not that much happens during a shutdown to the stock market. It kind of glides through. But if this were to influence, let's say, not just to release the jobs data, but actually to make it worse, make the jobs data actually worse, it has more ramifications, I think.

12:10It does. And we may not know about those ramifications. We don't know about them. Isn't that better, Joe? Just go to sleep. I don't know. It's all good. Ignorance is bliss. But, you know, if it added to a bad number because some some people are actually fired. I'm actually going to talk about that, Joe. We do this a lot. We do this a lot because I know you. You do. And you know me. I know you. Twenty three years or something like that for me anyway. Right. But listen, the government payroll report is vital. But over a short period of time, there are ways to figure out what's going on in the jobs market and with the economy.

12:46ADP, it's volatile month to month relative to the government payroll report. But over the course of a year, check this out, guys. It lines up really closely with the private sector portion of the Bureau of Labor Statistics data. In fact, year to date in August, it was off by just 9000 jobs a month. But of course, it's not always that good. Like a lot of indicators, it was way off during the pandemic. And that raises the concern if jobs are at an important inflection point, alternative data could miss that change. Jobless claims will still be published, giving Wall Street a sense of firing. But we're going to miss the hiring side of that.

13:19Michael Feraldi from J.P. Morgan told me yesterday, the basic model for forecasting jobs, you take the three month average of jobs, add in something from claims. And that's been pretty hard to beat. A little dirty little secret right there. For early adds that continuing claims, plus the conference board's employment data about jobs being hard to get versus easy to find, it's a good proxy for the unemployment rate. Claims, you can see the continuing claims have been elevated since May, but haven't gotten much worse. Only one month. And even trended a bit, right, exactly. Even trended a bit lower.

13:47Ian Shepardson from Pantheon. He says the best single indicator of payrolls three or four months ahead is the hiring intentions in the small business NFIB survey. after weakening earlier this summer it's shown you can see there's some signs of stability so he's not worried that we're at this terrible inflection because he's looking three or four months ahead but getting this is what i was waiting for getting to joe's point he always gets to the end first which is good but one missing piece of data here government jobs the trump administration's layoffs of federal workers were going to show up this month or next month By the way, we're getting close to the survey week.

14:25So there's no replacement for that in the private sector data. We're going to have the ADP report at 8-15 and the chief economist, Neela Richardson. The expectation is for a gain of 45 ,000 in the private sector with the forecast for the BLS government and the private sector at 51 on Friday. Guys, since there's no government, I have a proposal. Can we just name Neela Richardson the acting BLS commissioner? Because she's going to give us the ADP stuff, and that's what we got. She might be good to be the permanent. Who knows? We could do it. Right. There's nobody to do it. Yeah. Hence the name private.

14:56It doesn't include government. You just pointed out. I will say this, Joe. I went down the alley, really the rabbit hole of the private sector data during the pandemic and the data trying to find replacements. You really can't do it. It helps. It doesn't replace it. There's things that the government should be doing in terms of incorporating private sector data. But at this point, we're not in a place right now. Everybody was really hopeful then. I would do all these regressions with this data and it couldn't replace it. But is there any way we have hit the trough already and jobs are reaccelerating?

15:32One of the things I'm hearing right now, even from Fed officials, is this sense that they feel like business is getting used to dealing with the uncertainty and some of the new policies of the administration. So if you think about the reaction in the middle of uncertainty, you pull back, you wait, you don't fire, because remember you spent all that time and angst trying to find these people. And then you say, okay, I'm not going to let them go, but let's wait to see what happens. And as this becomes clear, and of course you wake up one morning and there could be 100 % tariff on your pharmaceutical endpoints, but maybe other sectors are starting to feel like, okay, it's cool.

16:08For a week. Yeah. There's an intraday tariff chart. Right. But I'm laughing. It's not is it possible that the Fed does not get burned, that it didn't need to cut because we're already reaccelerating. But if inflation stays quiet, why not? Why not? I mean, if things actually might as well cut if you're not going to get burned by inflation. And maybe the Fed cut is already helping. I mean, it's not already helping employment, but it could in the next few months. I'm going to give you two answers to that. The first is yes, they definitely could. There's a lot of controversy or debate on the Fed about just how weak the job market is.

16:50I mean, you look at jobless claims. But you could cut anyway if there was no inflation. It's not that bad there. You haven't had the firing. You've had this weird situation of stalling. Plus, you have this immigration issue that we don't probably talk a lot about, which is what's happening on the supply side of labor. And if demand is coming down but supply also came down, then you don't have the spike of the unemployment rate. But now the geeky part of that answer is this. What the Fed cares about when it comes to inflation is the extent to which the labor market can be a source of inflation.

17:22So the extent to which the labor market is tight. Waller's main point when he stepped forward in July and said we can cut was that he saw the weakness in the job market as a sign that it would not be a source of inflationary pressure. And so, therefore, the Fed could be missing an opportunity here to be cutting if, indeed, the labor market remains soft and it remains not an issue, a benign source of inflation. Is it possible it could be re-accelerating but not inflationary in the labor market? I'm trying to get the best. We can get the best of both worlds. No, no, no, no, that's not impossible.

17:59I mean, Joe, what's happening with AI? Or AI, yeah. Do you have an idea? I could ask AI. You could ask him. I did that, by the way, for one of my stories. But here's the thing. You have this interesting development where if this story about the grads not finding the jobs is true, you have an enormously talented, educated pool of labor that may not have something to do right away. And what they end up doing could be very consequential for what happens. What happens with factory workers, all that stuff is really very critical. Immigration is a critical issue. educated but they might not be talented i forget who said it but but one of the officials i read yesterday with like eight speeches this week we have pressure on both sides of the mandate we don't know what's happening because of the tariffs and the inflation and the jobs in the immigration so i i think i hope you're right about that joe but i don't think it's it's time to sort of make that call i'd like non-inflationary plus non-inflationary job well how would that happen because you move the goalposts to three look look here's the thing there's no inflation i asked them I asked Myron about this, as well as another Fed official.

19:07The administration says that its policies will be a source of non-inflationary growth. It's not something the Fed has embraced at this point in its models. And that's a major source of conflict between the administration and the Federal Reserve. It could be a pipe dream or it could be true. It could be true. And whether or not you take a flyer on it being true is really what's a questionnaire.

19:33ADP private payroll data just hitting the wires and Steve Leisman is here with those numbers. Steve. Minus 32 ,000 versus an estimate of 45 ,000. Put an asterisk on that. We're going to explain why that's lower than expected in just a second. The good sector down 3 ,000. The service sector down 28 ,000. The non-farm payroll estimate for Friday is 51 ,000. Now, this number here that you saw was a result in part of ADP incorporating those recent big revisions from the BLS in terms of their April to March 2025 numbers. So August was 54 ,000. That's now been revised down to minus 3 ,000 as part of an incorporation of a new growth rate in the job market that ADP picked up from the benchmark revision.

20:23So September minus 32 would have been plus 11 without those revisions. But This is the new reality. This is the new growth rate. Okay, now let's look back to the report here. What happened? Small business down 40, medium business down 20, but large business still hiring, according to this report, up 33 ,000. By sector, education, health services still really leading and showing the way up 33 ,000. Natural resources and mining 4 ,000. And you can see there the big decline there, leisure and hospitality down 19 ,000 on the month. Job stayers in terms of wages, 4.5%. Job changers, though, up just 6.6%.

21:02That's considerably down from August, which was 7.1%, led by leisure and hospitality and financial activities. We're lucky here to have the Squawk Box acting BLS commissioner, Neil Richardson. Oh, wow. Who we've now, at least for us. Well, in the absence of a government, I believe we can do that, right? We can name anybody we want, right? And that's now. It's like a recess appointment. Exactly. Because this show is really recess, right, Joe? Kind of. You out there playing in the program. I don't think it's happening. Yeah. For this five-minute segment, I will be only representing ADP. Can I tell you we can do a lot worse than having Neal Richardson as BLS commissioner?

21:37I don't think she wants it. No, I wouldn't either. Neal, let me ask you. The revisions from the government, I'm a little surprised that that played into what you all do. I thought you all kind of ran your own numbers. You looked at it your own way. But you do take government numbers into account for what you come out with? Yeah, so it's very important to be clear on this point. What we do is what the BLS does with their survey data, which is annually we re-benchmark it to the truth. And in the United States, that truth comes from all the workers that are covered by employment insurance regulation by the states.

22:11The BLS serves as an aggregator to these employment numbers. They are basically a near census of all the workers in the United States with one caveat. Why don't we just look at the QCW and throw away ADP and BLS? Well, the problem with it is that it comes out with a six-month lag. So every year, ADP re-benchmarks to this source of the truth that is complete but lagged by six months. And so what you're seeing from us, what you're seeing from the BLS is an estimate, an indicator of what this benchmark will look like in six months. And so this is a statistical process. It's really important. But what I want the viewers to understand is that the narrative remains the same.

22:56There has been a slowdown in the hiring momentum from the beginning of the year to where we are now. And that is consistent whether you look at the re-benchmark numbers, which Steve just shared today, or without the benchmark. Whether you look at ADP or what I think what you'll see in the BLS is a slowing of hiring momentum based on where we are in the economy. I get that, and I hope viewers get that at home. The question becomes, and sometimes we don't, it's a silly thing to care if something's on either side of the zero line. But in this case, when it's jobs and it's negative, the narrative of the slowdown may be the same, but does it matter more now that we seem to be losing jobs?

23:40Of course it matters. It matters. And so this is a month. We have to look at the trend. So we've seen the weakness for two months in a row. We're going to be looking forward to see if that trend holds through the end of the year. But we have to caveat it with other data, not just these numbers. So what have we seen in other data? First of all, we've seen very low initial jobless claims, which means that this is still a low hire or no hire in this case, but also a low fire jobs market. That's very important. The second important other data point that we have to weave in here is Q2 growth rates for the economy as a whole.

24:18So that GDP number was strong. It was robust in the second quarter. The question is, will that growth that was based on consumer spending? And it is continuing, by the way. We have the tracking numbers for third quarter are surprisingly. I was very, by the way, moved by the Contessa Brewers report about carnival bookings up 26, booking healthily into 27. Casinos are doing well. Well, it's hard to see the consumer flat on their back when they're basically taking cruises and gambling at the casinos. So consumer spending is the backbone of the economy and more so now than ever. It's really driving that growth.

24:54But the question in my mind as a labor economist is, is that consumer spending strong enough and broad based enough? And that's an important caveat as well to support job growth. We know it's supporting economic growth, but is it supporting labor market growth? Right now, we're not seeing it. Can I just interrupt here real quickly, guys, if you could put up a 10-year? No one was saying anything. You hit stop. All right. Well, then I'm going to go ahead then. Okay. Go ahead. Okay. Take a look at the 10-year. It did seem to take a little bit of a leg down here. Yeah, we were at 4.16. 4.10 we had.