Data Gaps from Shutdown Push Fed to Postpone Rate Cuts

The U.S. government's 43-day shutdown, the longest in history, ended on Nov. 12, 2025, as Congress passed a bipartisan funding bill to reopen federal agencies. While the resolution of the political stalemate removed an immediate source of economic uncertainty, it left another: a critical shortage of key economic data that will confront Federal Reserve policymakers as they prepare for their December meeting. With employment and inflation reports delayed or permanently lost, the Fed now faces a murky landscape, increasing the likelihood of a pause in rate cuts.

The shutdown's economic toll was severe. Approximately 1.4 million federal workers were furloughed or left unpaid for six weeks, leading to an estimated $11 billion in lost output over the next year, according to the Congressional Budget Office. Private-sector data, however, suggests a less dire picture. The ADP report showed a 42,000 increase in private-sector payrolls in October, exceeding expectations, and the Chicago Fed's nowcast pegged the unemployment rate at 4.36% for both September and October.

Despite these indicators, the absence of official government data has left policymakers with an incomplete view of labor market trends.

The Federal Reserve's December meeting will occur without the September and October jobs reports, the October CPI reading, and other critical metrics. Bureau of Labor Statistics officials have acknowledged that the October CPI and employment data may never be fully reconstructed, as data collection was either halted or severely curtailed during the shutdown. This gap has heightened uncertainty among Fed officials, with several members emphasizing the need for caution. "There is a premium on waiting to decide on rates until you have as much information as possible," San Francisco Fed President Mary Daly stated, while New York Fed President Michelle Witzman Collins noted she would hesitate to ease policy further without clear signs of labor market deterioration.

Financial markets have already priced in a shift in expectations. As of Nov. 13, the probability of a December rate cut had fallen to 53.6% from 95.5% in early October, reflecting traders' belief that the Fed will prioritize data-driven decisions over preemptive easing. Fed Chair Jerome Powell's earlier remarks-citing prolonged uncertainty as a reason for caution-have reinforced this market skepticism. With the Fed's December meeting looming, analysts increasingly anticipate a pause in rate cuts, allowing policymakers to assess the economic landscape with the limited data available.

The fallout from the shutdown extends beyond the Fed. Unpaid court-appointed defense attorneys, who handle 40% of indigent criminal cases, faced severe operational disruptions, forcing many to take on debt or side jobs to stay afloat. While payments are expected to resume, the backlog of unresolved cases underscores the broader strain on federal services.