Key Takeaways
- Officials at the Federal Reserve are missing critical data during the government shutdown, relying instead on reports from private companies.
- There are indications that hiring continued to slow since the government’s most recent report in August.
- Private-sector inflation data was mixed, with one index rising to a two-year high and another showing prices falling.
While the government’s statistical agencies aren’t publishing crucial data during the ongoing shutdown, Federal Reserve officials are closely watching private-sector data to shine a light on economic trends.
The data from the Bureau of Labor Statistics and other agencies is considered the “gold standard” by economists and provides the most comprehensive view of the economy. However, alternative indicators do provide the Fed with some insight into what is happening with inflation and the job market during the shutdown. Data is crucial to help the Fed achieve its dual mandate of keeping price increases stable at 2% per year and maintaining high employment.
“It doesn’t replace the government data, but it gives us a picture,” Fed Chair Jerome Powell said last week at a press conference following the Fed’s decision to lower interest rates by a quarter of a point. “If there were material developments, I think we would pick that up.”
The private data is especially important because the most recent official reports showed inflation rising and the job market weakening. That raises the risk that the U.S. will slip into “stagflation” as trade wars and the ongoing government shutdown send shockwaves through the economy.
At the same press conference, Powell mentioned several indicators that Fed officials are closely monitoring during the federal data blackout.
What This Means For The Economy
Here’s how economists, businesses, lawmakers and other policy experts are monitoring economic trends and making decisions during the longest government shutdown in U.S. history.
Here’s what those specific indicators say about the economy:
State-Level Initial Jobless Claims
Although the Department of Labor is not publishing its usual weekly report on jobless claims, analysts at Goldman Sachs and J.P. Morgan were able to piece together an estimate based on reporting from states. According to that estimate, 219,000 people filed for unemployment last week, down from 232,000 the week before, Reuters reported.
Earlier this week, Fed Governor Lisa Cook noted that while recent data indicate a solid job market, it has continued to weaken since the last official report in August, and that the unemployment rate had crept up to 4.3% in August from 4% in January.
“Taken together, the slightly rising unemployment rate indicates the labor market is softening, but only modestly so,” she said.
Job Openings From Indeed
Powell said he was looking at private data on job openings on sites including Indeed, which similarly signaled a slowdown in the job market.
Last week, its job posting index fell to its lowest level since February 2021, continuing a downward trend that began in mid-2022.
ADP Pay Data
Payroll provider ADP publishes reports on both job gains and losses in the private sector, as well as worker pay.
ADP’s most recent reports have shown a slowing job market. Private employers added 42,000 jobs in October, slightly exceeding the 35,000 jobs lost over the previous two months, and far below the typical six-digit monthly pace of job creation.
The Fed will see one more ADP report before its next policy meeting in December.
PriceStats
Powell said private data provider PriceStats supplies a look at inflation in the absence of official data such as the Personal Consumption Expenditures report from the Bureau of Economic Analysis.
PriceStats generates a daily price index through web scraping of online prices. The data is not publicly available, and the company did not immediately respond to a request for the data.
Financial firm State Street reported PriceStats’ index rose 2.66% over the year in September, marking its highest annual inflation since 2023. By comparison, the Consumer Price Index rose 3% in September, its highest level since January.
Adobe
Software company Adobe also publishes a price index based on data from online retailers.
Online prices actually fell 2.9% over the year in October, according to Adobe, marking a 26th consecutive month of continuous deflation.
The Beige Book
Powell shouted out the Fed’s own Beige Book as an important, if anecdotal, source of economic data.
The Beige Book compiles reports from Fed branches all over the country. In October, the report showed the job market losing steam in its low-hiring, low-firing limbo.
The next Beige Book is due Nov. 26.