Market Participants Flying Blind Without Economic Data

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

The three, Joshua Dennerlein, Michael
Hanson, and Ethan S. Harris write in an Economic
article “Data drought,” that the September payroll report and several
other indicators that should be released in the next few weeks feed directly
into their GDP tracking model which they won’t be able to update until the
shutdown ends.   

Until today the only economics-related releases
affected has been the construction spending report scheduled for October 1, but
next week there are three reports due, the wholesale inventories and trade
balance reports for August and September retail sales data.  By the middle of October we should also see data
on the Consumer Price Index and Census Bureau information on housing starts and
housing permits. Data on jobless claims will continue to be released on
Thursdays because most data is collected at the state level and aggregated by
the Department of Labor.  The program is
considered “exempt” from the shutdown.

Once the shutdown ends the economists say
that experience gained from the last previous interruption indicates it will
take a while for the flow of data to resume. 
That three-week long shutdown began in December 1995 and ended on
January 6, 1996 but it took until January 19 for the BLS to complete the data
collection it had started pre-shutdown, process it and release the September payroll
report.  This time it is fair to assume
that much of the work on the report is completed and Merrill Lynch said it
expects a much shorter post-shutdown time lag before it is released.  If the shutdown ends this weekend the report
could be released next week.   

The October report is a different matter.  The employer survey for that report is
scheduled for next week.  If the shutdown
continues the economists expect that BLS will eventually conduct a retroactive
survey regarding payrolls for that week. 
It is likely, however, that the statisticians will miss the scheduled
November 1 release date, delaying the report for a week

The outcome for the household survey is
less clear.  This survey, the basis for
calculating the unemployment rate, labor force participation, and part time
work, involves calling households to ask about their employment status.  The longer the government agencies remain
off-line the less time there will be to conduct the survey.  BLS has two options – call the households and
ask retroactively about their October job situation or forgo the survey
entirely which, the economists say, is the likely outcome if the shutdown lasts
through the month.

The Federal Reserve is self-funded so is
not dependent on Congress to continue its operations and thus its data will
continue to be released.  This includes
information on industrial production, bank lending, money supply, and various
financial and currency reports.  They
will also continue to hold scheduled meetings but, as the economists point out,
without the information they rely on from other government sectors the Fed
policymakers will also be operating in a “data fog.”

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