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The U.S. government is nearing its longest shutdown in history, with Republicans and Democrats still at loggerheads over the nation’s budget. While the standoff shows no immediate sign of easing, investors and policy decision-makers are flying blind without federal data to help color their perceptions about the health of the economy.
The Fed has already gone through one interest rate meeting without key data about its mandate: Maximum employment and a stable rate of inflation. Investors are also entering another month without significant barometers and may be turning to private surveys in a hunt for clues.
These private surveys, while useful in a vacuum of information, shouldn’t be given outsized weight, analysts warned Monday. For example, on Monday the U.S. ISM manufacturing sentiment poll is due, with the next ADP jobs review also expected later this week.
“The danger with this data is that its message will be given unwarranted credibility by the absence of proper economic data,” said UBS’s chief economist, Paul Donovan, in a note to clients on Monday. “Falling survey response rates and rising political polarization have conspired to reduce the reliability of survey-based evidence.
“Unfortunately, the frequency of surveys already means that they get more attention than they deserve. Frequency bias means we automatically pay attention to less-of-important things that are paraded before us more often. Remove alternative U.S. data sources, and there is a temptation to say: ‘Well, we’ll use this inaccurate number because there are no accurate numbers available.’”
Donovan was echoed by Deutsche Bank’s Jim Reid, who wrote in a note seen by Fortune on Monday: “If it weren’t for the shutdown, we’d be looking forward to the U.S. jobs report for October on Friday. But given we aren’t getting the government data releases, there’s likely to be outsize attention on the ADP’s report of private payrolls on Wednesday, especially in light of Chair Powell’s hawkish press conference last week.”
At the Fed meeting last week, Powell delivered his highly-anticipated 25 basis points cut but failed to confirm what Wall Street has long been hoping for: A final cut of 2025 due to come in December. Instead, the Fed chairman stuck to his wait-and-see rhetoric, arguably more suitable now than ever before in the absence of key metrics to help chart the best course for monetary policy.
On the ADP data, Deutsche said it expects a print of +50,000 jobs, compared to -32,000 previously, with consensus at +30,000.
Deutsche’s economists “think a rebound in the ADP survey would align with seasonal patterns observed over recent years during the summer and autumn,” Reid added. “These seasonals may have artificially weakened the recent headline figures, although strict immigration curbs and subdued hiring and firing point to a fragile low level equilibrium in the labour market which wouldn’t take much to shift momentum either way.”
While potentially shakier data may cause volatility in markets later this week, for now ignorance appears to be bliss. In the U.S., the S&P 500 and Dow Jones are flat ahead of opening today, though the VIX volatility index is up 5% suggesting bumpy days ahead.
In Europe, Germany’s DAX is up 0.85%, London’s FTSE 100 is flat, and Europe’s STOXX 50 is up 0.54%. Asia is similarly genial: Shanghai’s Stock Exchange is up 0.55% and Hong Kong’s Hang Seng Index up 0.97%.
Here’s a snapshot of the markets ahead of the opening bell in New York this morning:
S&P 500 futures were up 0.59%.
The STOXX Europe 600 was up 0.37%.
The U.K.’s FTSE 100 was flat.
China’s CSI 300 was up 0.27%.
India’s NIFTY 50 was up 0.16%.
Bitcoin was down to $107K.
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