Can the Fed Get Missing Economic Data in Time for Rate-Cut Decision?

What do airline pilots have in common with Federal Reserve policymakers? Both risk flying blind because of the government shutdown. 

While a stopgap funding deal is officially in place and will likely be signed, sealed, and delivered by the end of the week, the government still has some work to do to fill in its backlog of missing economic data from September and October that would have been published already were it not for the longest shutdown in US history. Whether the catch-up will be complete before the Fed’s interest-rate committee holds its final meeting of the year, scheduled for December 9 and 10, remains an open question. As if Chair Jerome Powell’s life weren’t complicated enough.

Late Work Policy

Assuming the government reopens by week’s end, analysts at Goldman Sachs wrote in a note to clients seen by CNBC on Tuesday that the Bureau of Labor Statistics will likely release its September jobs report, which was initially scheduled for early October, by Tuesday or Wednesday, but is expecting delays for the October jobs report, as well as key spending and inflation reports from the Commerce Department.

Meanwhile, Morgan Stanley Chief Economist Michael Gapen told Barron’s on Tuesday that the October and November jobs reports could be released on December 8, just before the Federal Open Market Committee meeting, a projection based on what happened after the 2013 government shutdown.

In other words, Powell and company could be left a bit in the dark. That might only exacerbate the committee’s existing tension:

• After the Fed’s October meeting, Powell stressed that “strongly differing views” remained among members, though he added that there appeared to be a “growing chorus” to “at least wait a cycle” before cutting rates again. 
• On the other hand, Fed Governor Stephen Miran said Monday that signs of a softening labor market and falling inflation could be grounds for a 50 basis-point cut in December. According to CME Group’s FedWatch tool, traders see a 67% chance of a quarter-point cut.

The Big Picture: At present, the Atlanta Fed’s GDPNow tracker predicts that third-quarter data will show US GDP growth of 4%, while Goldman predicts fourth-quarter GDP growth of 1.3%. That would put the US on pace for 2% GDP growth for the year, down slightly from 2.8% last year. Among those not worried about a slowdown? C-suite types, who have mentioned “economic slowdown” the least number of times this earnings season since 2007, according to a recent Bloomberg analysis. At least someone has their anxiety under control these days.