Government Shutdown Disrupts Key Economic Data, Complicating Fed's Policy Path

The U.S. government shutdown has disrupted the release of critical economic data, creating uncertainty for policymakers and markets. White House press secretary Karoline Leavitt stated that the Bureau of Labor Statistics (BLS) may never publish October’s consumer price index (CPI) and jobs reports, as staff furloughs halted data collection and processing . The shutdown, now the longest in U.S. history, has left a void in timely economic indicators, with only the September CPI report released during the blackout period .

The absence of October data has forced economists and analysts to rely on incomplete or alternative metrics. The Labor Department’s statistical agencies have suspended normal operations, including the Census Bureau and Bureau of Economic Analysis .

While the September employment report could be released as early as next week, October’s reports face permanent gaps due to missed physical data collection efforts . This disruption has heightened concerns about the Federal Reserve’s ability to assess inflation and labor market conditions, complicating its December policy meeting.

The Federal Reserve’s recent monetary policy decisions have already been influenced by the data void. At its October 28-29 meeting, the Fed cut its benchmark interest rate by 25 basis points to the 3.75%-4.00% range, but the move drew two dissents—one from Kansas City Fed chief Jeffrey Schmid, who opposed the cut, and another from Governor Stephen Miran, who advocated for a larger half-point reduction . Fed Chair Jerome Powell has acknowledged the “data fog” caused by the shutdown, stating that another rate cut at the December meeting is “not a foregone conclusion” .

The Fed’s internal divisions have deepened as officials grapple with conflicting signals. Boston Federal Reserve President Susan Collins, a voting member who supported both 2024 rate cuts, emphasized a “relatively high bar” for additional easing, citing inflation risks and the lack of reliable data . She argued that policy rates should remain unchanged to balance inflation and employment risks in an “uncertain environment.” Collins’ caution contrasts with Miran’s earlier call for a more aggressive rate cut, highlighting the central bank’s lack of consensus .

The prioritization of November data has become a focal point for resolving the policy uncertainty. Economists urge the Labor Department to expedite November employment and CPI reports to provide the Fed with updated information for its December meeting . Boston College’s Brian Bethune noted that releasing November data first would allow for chronological backfilling, avoiding delays that could exacerbate policy missteps . However, the White House warned that October’s reports may never be recovered, leaving the Fed to rely on indirect measures .

The shutdown’s impact extends beyond monetary policy. Private institutions have attempted to fill the data gap, but their efforts lack the authority and comprehensiveness of official statistics . The absence of October data also affects broader economic assessments, as businesses and investors struggle to gauge labor market strength and inflation trends. This uncertainty could prolong the Fed’s deliberations, potentially delaying the next rate decision until January .

Statistical agencies have indicated they will update release schedules once operations resume, but the long-term implications for data reliability remain unclear . The shutdown has already strained the Federal statistical system, with Leavitt attributing the damage to Democratic actions . As the House votes to end the shutdown, the path to restoring normal data publication remains uncertain, with October’s reports likely lost and November’s data becoming the new baseline for economic analysis .