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The federal government will stop producing key economic data if government funding elapses Wednesday, depriving policymakers and investors of crucial information amid deep concerns about the job market.
If President Trump and Democratic lawmakers fail to reach a funding deal before a Wednesday deadline, the Bureau of Labor Statistics (BLS) will shutter until the shutdown is over, according to a contingency plan released Monday by the Labor Department.
That would prevent BLS from releasing the highly anticipated September jobs report on Friday as scheduled, and could delay the agency’s collection of other key economic data. BLS also produces consumer price index (CPI) data on inflation and wages — both of which are closely watched by policymakers and investors.
“A lot of economic data can’t be released during shutdowns,” wrote Callie Cox, chief market strategist at Ritholtz Wealth Management, in a Monday analysis.
“This is a big deal for our interest-rate superheroes (the Federal Reserve), who preach about how they like to make decisions based on economic data. You, me and Fed chair Jay Powell are all flying blind without these crucial reports.”
Investors and policymakers are already struggling to make sense of the U.S. economy after several major shocks. A lack of key BLS data could make it even harder for experts to assess where the economy is going at a crucial juncture.
Inflation and unemployment typically move in opposite directions, since prices tend to rise when consumers have more purchasing power and fall when companies are struggling to find demand for their products.
But both have increased since Trump took office as the president’s tariffs pushed prices higher while mass deportations and severe cuts to the federal workforce drain the labor market.
The annual inflation rate in August hit 2.9 percent, as measured by the CPI, after falling to 2.4 percent in March. The unemployment rate also rose to 4.3 percent in August from 4 percent in January, and the U.S. has added an average of just 29,000 jobs per month this year.
The Fed cut interest rates earlier this month as officials expressed growing alarm over the weakening job market, even as inflation continues to accelerate.
Powell said in a press conference following the cut that while the economy still faces inflationary risks from Trump’s tariffs, the “unusual” decline in the job market had become a larger concern for the Fed.
“There’s very little growth, if any, in the supply of workers. And at the same time, demand for workers has also come down quite sharply, to the point where we see what I’ve called a curious balance,” Powell said.
“Typically, when we say things are in balance, that sounds good. But in this case, the balance is because both supply and demand have come down quite sharply. Now, demand is coming down a little more sharply, because we now see the unemployment rate edging up,” he continued.
A brief government shutdown may have limited impact on the federal government’s economic data collection, and the Fed should have ample time to get another read on the labor market before its next interest rate meeting in November.
Past funding lapses have also had a limited impact on the overall economy, even when considering the serious financial burdens they can place on federal employees, contractors and their dependents.
“Shutdowns alone haven’t done enough to topple a thriving economy. They’ve never led to a recession or market crash, even if some have happened during recessions or market crashes. Usually, shutdowns have led to some initial shakiness in the stock market, even if the losses are only temporary,” Cox wrote.
But the White House’s threat to fire — not just furlough — thousands of government employees during a shutdown is a major economic risk unique to this shutdown fight.
“A shutdown would be another shock to absorb, and it’s tough to say how well investors will absorb it. I’d feel better about the shock absorption part if the economy were in a better spot, and this catalyst were a little more defined,” she wrote.
