Fed eyes next moves amid mixed signals and delayed government data
As the government shutdown drags on, businesses, markets, and policymakers are deprived of many of the key economic metrics they’re accustomed to following. Government-sourced data is the best available in many cases and the only source in others. For instance, labor and productivity data, inflation indicators tracking consumer and producer prices, housing metrics, and personal income and spending are all delayed by the shutdown.
The only exception will be the Consumer Price Index (CPI) report that will be released on October 24th ahead of the Federal Reserve’s (Fed) October 28-29 meeting. But the Fed is hardly the only entity waiting for data—Social Security and Medicare Part B premiums for 2026 depend on the third quarter CPI data as do governments and businesses setting COLAs for pensions and contracts. The Fed lowered its benchmark rate a quarter point in September and expects two more quarter-point rate cuts before the end of the year.
In the absence of those traditional metrics, folks are straining to glean clues from other sources to fill in the gaps. For example, there are several alternate employment data sets, including from private payroll processors such as ADP and Paychex, workforce intelligence firm Revelio Labs, and Carlyle Group, among others; however, each paints a decidedly different picture of the labor landscape. Moreover, each have their own shortcomings compared to the Bureau of Labor Statistics (BLS); most notably, smaller sample sizes and dramatically narrower geographic scopes.
Nonetheless, our business contacts continue to share anecdotes of subdued job growth, with many firms remaining in a 'low hire/low fire' stance amid ongoing tariff uncertainty and broader economic sluggishness
Consumer sentiment continued its slide for the third straight month and is at its lowest level since May. Inflation worries persist, although one-year expectations dropped slightly to 4.6%. Consumer sentiment aligns with the BLS data reported last month showing inflation is running hotter in August at 2.9% annually. Tariffs likely contributed to rises in manufactured goods including auto parts, tires, and home furnishing along with imported food. We’ll soon see whether the lift in non-farm productivity observed in August can help quell inflationary pressures.
Bottom line:
The U.S. economy continues to muddle through. We’re hopeful that the economy is stabilizing and anticipate a modest growth reacceleration in 2026, supported by certainty in tax policy, further clarity on tariffs, and lower interest rates. We expect that the Fed will likely proceed cautiously until there’s more evidence of where the economy is heading, a challenge given the government-sourced economic data embargo.
