The ongoing government shutdown is producing more than just political problems, as it is stopping the release of key economic data, according to ABC news.
As the transmission of vital federal data for policymakers, investors and economists hits a total halt, the September jobs report, which offers crucial information on the state of the labor market, will be one of the most conspicuous absences.
The Census Bureau and the Bureau of Labor Statistics, two agencies that are directly impacted by the shutdown, have been unable to process or publish data. This comprises consumer expenditure figures, GDP updates, inflation indicators and employment statistics.
Without this data, financial markets are compelled to function in a vacuum and economists are unable to determine if labor slack is rising or inflation is decreasing. Trading algorithms that were adjusted to labor trends are now operating blindly in the absence of payroll data.
Due to the ambiguity surrounding rate-cut bets and recession projections, analysts are being forced to depend on private statistics that don’t meet federal standards.
Columbia Business School Professor Brett House, told CNN, “the shutdown adds to the significant policy uncertainty and volatility that we’ve seen this year from tariffs, court cases, government staff reductions, and threats to the independence of statistical agencies and the Fed.”
Federal Reserve officials are similarly in a difficult situation. The central bank does not have new government data to support a prolonged pause or a possible reversal as its next interest rate decision approaches.
Before raising rates, the Fed usually considers economic production, inflation data and job growth.
It now has to rely on incomplete or lagging private-sector alternatives to inform its advice, which increases the possibility of either delayed tightening or premature easing.
The Personal Consumption Expenditures index, a crucial inflation indicator that the Fed favors, is also delayed. In addition to the missing jobs data, data on retail sales, trade balances and housing stats are all frozen.
Until the government reopens, the Census Bureau will not provide its durable goods orders and Quarterly Services Survey, which are essential for comprehending corporate investment. This implies that almost all of the main economic pillars are no longer observable in real time.
This is not unprecedented in history. The BLS was also unavailable during the 2013 and 2018 shutdowns, and when traders attempted to predict changes in the economy with little information, markets were more erratic.
When data came back, previous assumptions were challenged, leading to significant market repricing. Similar disruptions could be anticipated if the present shutdown continues for a few more weeks, particularly in bond yields and rate-sensitive stocks.
Companies in the energy, aerospace and construction sectors, are currently in limbo as they await labor or permit reports.
The same is true for small enterprises that are unable to get loans supported by SBA data. Over time, these operational conflicts will worsen, particularly if the congressional impasse lasts until the middle of October.
Economists are now expecting that the closure will end before the CPI is released in October. If not, there is a greater chance of a policy blunder as the Fed and the markets will have to negotiate the fog with little vision.
