Market Participants Flying Blind Without Economic Data

The federal payroll report (Employment Situation or “NFP”), eagerlyrnawaited on the first Friday of each month, will not be available today or forrnthe foreseeable future. The Bureau of Labor Statistics (BLS) which prepares itrnis, for all intents and purposes, temporarily out of business.   Andrnthis is not the first piece of important data to go missing this week.  Among the 800,000 federal employeesrnfurloughed on Tuesday are the researchers, compilers, and statisticians who compilerndozens of reports that track and report on business, employment, construction,rnspending, disease, crops, weather, and public safety. Without the normal datarnflow, three Bank of America Merrill Lynch economists say they, along with thernmarkets and the Fed, “are flying blind when it comes to tracking the economy.”  </p

The three, Joshua Dennerlein, MichaelrnHanson, and Ethan S. Harris write in an EconomicrnWatch article “Data drought,” that the September payroll report and severalrnother indicators that should be released in the next few weeks feed directlyrninto their GDP tracking model which they won’t be able to update until thernshutdown ends.   </p

Until today the only economics-related releasesrnaffected has been the construction spending report scheduled for October 1, butrnnext week there are three reports due, the wholesale inventories and tradernbalance reports for August and September retail sales data.  By the middle of October we should also see datarnon the Consumer Price Index and Census Bureau information on housing starts andrnhousing permits. Data on jobless claims will continue to be released onrnThursdays because most data is collected at the state level and aggregated byrnthe Department of Labor.  The program isrnconsidered “exempt” from the shutdown.</p

Once the shutdown ends the economists sayrnthat experience gained from the last previous interruption indicates it willrntake a while for the flow of data to resume. rnThat three-week long shutdown began in December 1995 and ended onrnJanuary 6, 1996 but it took until January 19 for the BLS to complete the datarncollection it had started pre-shutdown, process it and release the September payrollrnreport.  This time it is fair to assumernthat much of the work on the report is completed and Merrill Lynch said itrnexpects a much shorter post-shutdown time lag before it is released.  If the shutdown ends this weekend the reportrncould be released next week.   </p

The October report is a different matter.  The employer survey for that report isrnscheduled for next week.  If the shutdownrncontinues the economists expect that BLS will eventually conduct a retroactivernsurvey regarding payrolls for that week. rnIt is likely, however, that the statisticians will miss the scheduledrnNovember 1 release date, delaying the report for a week.  </p

The outcome for the household survey isrnless clear.  This survey, the basis forrncalculating the unemployment rate, labor force participation, and part timernwork, involves calling households to ask about their employment status.  The longer the government agencies remainrnoff-line the less time there will be to conduct the survey.  BLS has two options – call the households andrnask retroactively about their October job situation or forgo the surveyrnentirely which, the economists say, is the likely outcome if the shutdown lastsrnthrough the month.</p

The Federal Reserve is self-funded so isrnnot dependent on Congress to continue its operations and thus its data willrncontinue to be released.  This includesrninformation on industrial production, bank lending, money supply, and variousrnfinancial and currency reports.  Theyrnwill also continue to hold scheduled meetings but, as the economists point out,rnwithout the information they rely on from other government sectors the Fedrnpolicymakers will also be operating in a “data fog.”

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