US Government Shutdown's Impact on Macroeconomic Data and Fed Policy

Impact of Government Shutdown on Economic Data

• ⚠️ The US government shutdown is creating significant uncertainty and a lack of crucial economic data, akin to driving in fog.
• 💡 This data scarcity might even be a reason for the Federal Reserve to consider another rate cut in December.
• 📉 Furloughed workers are not being paid, and benefits normally disbursed at this time of year are also seeing declines.

Economic Growth and Forecasts

• 📊 While past shutdowns have seen GDP take a hit followed by a bounce back, the current situation might be different, though forecasts haven't been adjusted yet.
• 💰 Workers are expected to receive back wages, which should support a bounce-back in economic activity.
• 🏠 The lingering effects of easier monetary policy are still supporting business investment and the housing market.

Corporate Earnings and Job Market

• 📈 Corporate earnings are holding up so far, with about 65% of the S&P 500 having reported.
• 💼 The job market, though slowing, hasn't seen a significant drop-off, with jobless claims hovering around stable levels, supporting consumer spending.
• ⚠️ However, ongoing uncertainty could impact future earnings and the job market.

Private Sector Data and Trade

• 🔍 In the absence of government data, investors are paying closer attention to private sector data like that from the Conference Board and ADP to gauge the job market.
• 📊 It's crucial to look at multiple surveys to ensure economic indicators are pointing in the same direction.
• 🌍 Recent trade developments, including a pause in US-China trade tensions and secured trade deals, are positive but the overall environment remains uncertain.

Canada's Trade Concerns

• 🇨🇦 From Toronto, the sentiment regarding tariffs is unsettling, as the US is Canada's largest trading partner.
• 🤝 There's hope for a resolution to trade issues, especially with the USMCA agreement being a significant deal for both countries.