As U.S. government shutdown begins, Wall Street braces for potential impact

Wall Street got off to a rough start Wednesday as a U.S. government shutdown begins and fresh labour market data pointed to more weakness on the job front.

U.S. stocks are drifting on Wednesday following the latest discouraging signal on the job market.

The S&P 500 fell 0.3 per cent in early trading, though it remains near its record set last week. The Dow Jones Industrial Average was down 51 points, or 0.1 per cent, as of 9:35 a.m. Eastern time, a day after setting its own all-time high. The Nasdaq composite was 0.4 per cent lower.

The action was stronger in the bond market, where Treasury yields sank after a report suggested hiring may have been much weaker across the country last month than economists expected.

Employers outside the government actually cut 32,000 jobs more than they added, according to the survey by ADP Research, with the hardest hits focused in the Midwest.

What’s worse, the survey also revised down its numbers for employment in August, down to a loss of 3,000 jobs from a previously reported gain of 54,000.

The ADP survey gets its numbers from a smaller sample of employers than the U.S. government does for its monthly jobs reports, and the ADP’s does not have a perfect track record predicting what the more comprehensive Labor Department’s will say each month.

Usually, traders on Wall Street wait for the U.S. government’s report to suss out more fully how the job market is doing each month. But the next one, scheduled for Friday, is likely to be delayed because of the shutdown of the U.S. government that began just after midnight. The Department of Labor has said that the Bureau of Labor Statistics will completely cease operations if there’s a lapse.

“Whether this is an accurate statistic or not, people in the markets believe that it signals something,” according to Carl Weinberg, chief economist at High Frequency Economics. “The signal from today’s headline will not be a good one.”