US Government Shutdown Casts Shadow on Economic Data: Challenges in Assessing Economic Health

Article Summary

• The US government shutdown has resulted in the loss of important economic data.
• Difficulty in accurately assessing the economic situation due to data scarcity.
• Potential impact on the Federal Reserve's decisions.
• Delays in the release of key economic reports.
• Expectations of moderate economic growth in the near future.

White House National Economic Council Director Kevin Hassett stated that the record-breaking government shutdown means that some economic data originally scheduled for collection in October may never be available, making it difficult to fully assess the health of the US economy.

"I've learned that some questionnaires were never actually completed, so we may never know the true economic situation for that month," Hassett confessed in an interview with CNBC on Tuesday. "We will be moving forward in a fog for a while until the statistical agencies resume operations."

Statistical agencies, including the Bureau of Labor Statistics and the Census Bureau, were unable to collect data during the shutdown, which poses a serious risk of missing specialized reports that rely on manual collection methods.

The risk of the Bureau of Labor Statistics being unable to release the October Consumer Price Index (CPI), a key inflation indicator, continues to rise. Meanwhile, economists are deeply concerned about the household survey used to calculate the unemployment rate.

As the government shutdown nears its end, forecasting agencies are carefully considering the release sequence of various reports. The September non-farm payroll report, originally scheduled for release on October 3, is expected to be the easiest and fastest to integrate and release, as data collection was completed before the government shutdown on October 1.

Goldman Sachs economists Elsie Peng and Ronnie Walker noted in a client report that: "The federal government shutdown has disrupted the release of almost all economic data for September and October. Although the shutdown is nearing its end, statistical agencies will need time to clear the backlog of data."

If the government is restarted before the end of this week, Goldman Sachs expects the Bureau of Labor Statistics to publish a revised data release schedule early next week. Key data handled by the bureau, such as the non-farm payroll report and the Producer Price Index, were originally scheduled for release this week. Other unreleased reports include import and export prices, the Employment Cost Index, and the Job Openings and Labor Turnover Survey.

Goldman Sachs economists predict that the October jobs report will be the first to be released after the government reopens, as early as next Tuesday or Wednesday. However, they warned that: "The release of other major data is expected to be delayed. This means that the November jobs and inflation reports may be delayed by at least a week."

The Department of Commerce's personal income and spending report (which includes the Personal Consumption Expenditures Price Index, a key inflation measure favored by the Federal Reserve) is particularly noteworthy, in addition to retail sales, durable goods orders, and quarterly GDP data. Once the data freeze ends, the various reports may present a similar economic picture: a labor market that continues to slow down, inflation that remains above the Federal Reserve's comfortable range, and overall growth that maintains a moderate pace.

The core issue currently lies in how statistical agencies, which are already facing staff shortages, will prioritize the backlog of reports, especially considering that data collection for November has already fully begun. Economists and investors are preparing for a data flood after the agencies resume operations, and statistical departments must coordinate the release schedules of backlog data and routine reports.

Federal Reserve officials have expressed concern about the inconvenience caused by the loss of data. A Dow Jones survey indicates that economists expect a decrease of 60,000 jobs in non-farm payrolls for October. Although Goldman Sachs reduced its forecast for the decrease to 50,000, the overall data still points to an economic slowdown. Powell revealed that the Federal Reserve estimates the core inflation rate for September at 2.8%, which is significantly higher than the policy target of 2%, but expects it to gradually decline by 2026. It remains uncertain whether the Personal Consumption Expenditures report scheduled for release on November 26 will be issued on schedule.

Looking at the economy as a whole, the Atlanta Federal Reserve's GDP forecast model shows a growth of 4% in the third quarter. Goldman Sachs raised its fourth-quarter growth forecast by 0.3 percentage points to 1.3%, which means that economic growth for the entire year is expected to remain at a moderate level of 2%.

Hassett pointed out that the 42-day government shutdown will impact the economy, but he predicted that economic growth will return to normal in early 2026.

He added: "Some data has been permanently lost, but some can still be saved. I expect economic growth to recover to a level of 3% to 4% by the first quarter of next year."

The US Senate approved a bill to reopen the government late Monday local time. The House of Representatives is expected to approve the legislation as early as Wednesday evening local time. The bill will then be sent to US President Donald Trump to sign into law.

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