{"id":95057,"date":"2025-10-22T21:06:09","date_gmt":"2025-10-22T21:06:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/95057\/"},"modified":"2025-10-22T21:06:09","modified_gmt":"2025-10-22T21:06:09","slug":"the-shutdown-is-complicating-the-feds-ability-to-help-the-economy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/95057\/","title":{"rendered":"The shutdown is complicating the Fed\u2019s ability to help the economy"},"content":{"rendered":"

Washington
\n \u00a0\u2014\u00a0<\/p>\n

\n The Federal Reserve was already facing one of its most difficult battles, steering a shifting economy through a weakening labor market and stubborn inflation. The government shutdown just made that fight even harder.\n <\/p>\n

\n To make determinations about its rate policy and other decisions to help the economy, the Fed relies heavily on official economic statistics that are collected and disseminated by the government. The shutdown has effectively cut off access to that data<\/a> \u2014 from the unemployment rate to retail sales \u2014 since the beginning of October.\n <\/p>\n

\n With just one week to go before the Fed\u2019s next decision on interest rates, officials are flying partially blind as they assess whether the labor market requires additional support, after data through August showed the weakest pace of hiring since 2010<\/a> and rising unemployment among young Americans and minorities.\n <\/p>\n

\n It\u2019s the latest wrinkle for policymakers as they tackle a continued attack from the Trump administration on their independence, an ongoing housing affordability crisis that the Fed doesn\u2019t have all the tools to fix, the potential effects of AI, persistent inflation, uncertainty around tariffs and a slowdown in the job market.\n <\/p>\n

The Fed and the shutdown<\/p>\n

\n In the absence of government data, Fed officials have turned to other sources to gauge the labor market and consumer spending \u2014 two important drivers of the US economy and the focus of the Fed\u2019s so-called dual mandate to balance economic growth with keeping prices in check.\n <\/p>\n

\n The problem is that government data is undisputedly the \u201cgold standard\u201d of how the world\u2019s largest economy is measured. Without it, the Fed\u2019s decision making is not fully informed. And the Fed might have even less access to private employment data this time around, after payroll software provider ADP ended its data-sharing agreement with the Fed in August, according to The American Prospect<\/a>.\n <\/p>\n

\n \u201cThe risk is that the Fed misjudges where the state of its dual mandate sits, whether inflation or the labor market is the bigger concern,\u201d Michael Reynolds, vice president of investment strategy at asset manager Glenmede, told CNN.\n <\/p>\n

\"Shoppers<\/p>\n

\n The last time Fed officials set monetary policy without key economic data was during the 2018-2019 shutdown. Minutes from the Fed\u2019s January 2019 meeting<\/a> showed how officials turned to figures on card transactions and vehicles sales in the absence of the Commerce Department\u2019s monthly report on retail sales.\n <\/p>\n

\n \u201cI wouldn\u2019t call it a data drought,\u201d New York Fed President John Williams told the New York Times in an interview published on October 9.\n <\/p>\n

\n \u201cWe\u2019re still getting a significant amount of data,\u201d he added, pointing to surveys from the Conference Board, the New York Fed and the Institute for Supply Management. Those surveys measure trends in prices, demand, production and overall economic activity.\n <\/p>\n

\n The Bureau of Labor Statistics on Friday will release the Consumer Price Index for September, having recalled staff to ensure the report can be used as a basis for Social Security\u2019s annual cost-of-living adjustments.<\/a>\n <\/p>\n

\n Still, that leaves the Fed in the dark on the labor market\u2019s true health and trajectory. Economists widely agree that private-sector figures cannot fully replace government data, especially considering that the government\u2019s numbers serve as the benchmark for much of the private data.\n <\/p>\n

\n The Fed\u2019s main tool \u2014 its key interest rate, which influences borrowing costs more broadly \u2014 is particularly effective at making borrowing cheaper or more costly, depending on whether the Fed is trying to tamp down inflation or boost employment. So, it\u2019s pretty good at changing how much consumers demand goods and services.\n <\/p>\n

\n But it does nothing to balance the \u201csupply\u201d side of the supply and demand equation, which is precisely what continues to drive up prices in some parts of the country, such as the Northeast.\n <\/p>\n

\"Home<\/p>\n

\n Sales of previously owned homes have been sluggish for the third-straight year, and persistently elevated mortgage rates have certainly played a role in keeping buyers on the sidelines. But so has the housing shortage.\n <\/p>\n

\n \u201cSales of affordable homes are constrained by the lack of inventory,\u201d National Association of Realtors chief economist Lawrence Yun said in a statement last month.\n <\/p>\n

\n The Fed has already acknowledged that there\u2019s only so much it can do to alleviate America\u2019s housing woes.\n <\/p>\n

\n \u201cThere is a long-term housing shortage,\u201d Powell said in a news conference after the Fed\u2019s July meeting. \u201cThis is not something the Fed can help with.\u201d\n <\/p>\n

The impacts of AI and economic uncertainty<\/p>\n

\n President Donald Trump\u2019s aggressive bid to reshape global trade has forced many businesses to put hiring plans on ice as they wait to see how everything plays out. And at the same time, many companies are actively trying to figure out how to implement AI into their operations.\n <\/p>\n

\n The result: unusually weak hiring, largely driven by businesses feeling paralyzed. But for some workers, it\u2019s also because of AI.\n <\/p>\n

\n \u201cThe labor market has been frozen up because people are just having a hard time making decisions,\u201d Laura Ullrich, an economist at Indeed, told CNN. \u201cAnd AI is certainly having some impact on entry-level tech jobs.\u201d\n <\/p>\n

\n The Fed\u2019s rate cuts should function like a tide that lifts all boats by making borrowing cheaper, allowing companies to expand head count. But that might not be enough to shore up demand for workers in roles that are increasingly being automated by AI.\n <\/p>\n

\n Additionally, while the Fed is poised to lower rates further, \u201cso long as economic uncertainty is high, it\u2019s hard to know exactly how many people you should hire,\u201d Ullrich said.\n <\/p>\n

\n That sentiment is borne out by businesses in the manufacturing and services sectors surveyed by the Institute for Supply Management, who continue to express frustration over Trump\u2019s significant policy changes and their ensuing effects on demand and planning.\n <\/p>\n

\n \u201cClient demand in professional services remains steady, though decision-making timelines are lengthening due to continued economic uncertainty and interest-rate concerns,\u201d one business said in ISM\u2019s September services survey.\n <\/p>\n

\n The Fed is set to announce its latest monetary policy decision at the conclusion of its two-day policy meeting ending on October 29, with a post-meeting news conference by Chair Jerome Powell scheduled for 2:30 p.m. ET that day.\n <\/p>\n","protected":false},"excerpt":{"rendered":"Washington \u00a0\u2014\u00a0 The Federal Reserve was already facing one of its most difficult battles, steering a shifting economy…\n","protected":false},"author":2,"featured_media":95058,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-95057","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/95057","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=95057"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/95057\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/95058"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=95057"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=95057"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=95057"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}