Government Shutdown Looms
The federal fiscal year is coming to a close, and with it, the possibility of a government shutdown. If a funding deal is not reached by Tuesday, many government functions will come to a grinding halt after midnight on Wednesday. While essential services like the military will continue to operate, a shutdown that lasts longer than a few days could have significant consequences.
Impact on Jobs Report
One of the key consequences of a government shutdown would be the delay of the monthly jobs report, which is set to be released on Friday. The report, produced by the Bureau of Labor Statistics, provides crucial information about the state of the labor market. A shutdown would mean that the data collection and release would cease, leaving investors and the Federal Reserve without up-to-date employment data. This is especially important given the current state of the labor market, which is showing signs of weakening.
Economic Indicators
The path of Fed rate cuts has been complicated by a growing disconnect in recent economic data. While payroll growth and the housing market have slowed, GDP has come in stronger than expected due to robust consumer spending. This has left Wall Street divided on whether the muted job gains are due to weak labor supply or weak demand. The September jobs report is expected to show a payroll gain of 45,000, up from 22,000 in the prior month, with the unemployment rate holding steady at 4.3%.
Other Affected Reports
In addition to the jobs report, other key data sets would also be affected by a shutdown. The job openings and labor turnover report is due on Tuesday, right before the shutdown deadline, while weekly unemployment claims are due on Thursday. Non-government data, such as ADP’s private-sector payroll report and the Institute for Supply Management’s manufacturing activity index, would be unaffected by a shutdown.
Potential Consequences
If a shutdown were to drag on longer than the first week, additional reports that are closely followed would be put on hold, including the September consumer price index. This could have significant consequences for the Federal Reserve, which relies on this data to inform its decisions on interest rates. In fact, if a shutdown continues further, Fed rate setters wouldn’t have access to some of their most important economic indicators when they meet again on October 28-29.
Economic Effects
Analysts at Bank of America have warned that while the economic effects of government shutdowns are typically modest and short-lived, an extended shutdown could have more lasting effects. This is especially true given the Trump administration’s threat to lay off federal workers rather than furlough them. A brief shutdown may not have much of an economic effect, but it would delay key economic data ahead of the Fed’s next meeting.
Conclusion
A government shutdown would have significant consequences for the economy, particularly with regards to the release of key economic indicators. While some reports, such as the jobs report, would be delayed, others, such as non-government data, would be unaffected. The potential consequences of a shutdown are far-reaching, and it is essential that a funding deal is reached to avoid a shutdown. The Federal Reserve, investors, and the general public are all waiting with bated breath to see what will happen next.
