Economic data solid to start 2026 despite double-whammy from the government shutdown

Trend watch

Most of the activity-based indicators on slide 5 (slides are available to clients in the full report) remain skewed by the sharp drop off around the year-end holidays. For instance, total rail traffic soared 31.2% during week 2 of 2026 after plunging -19.5% and  -6.1% during the prior two weeks. The staffing index – which tracks the number of temporary and contract workers – dropped 17.2 percentage points in 2025’s last two weeks. Still, this is the typical pattern around the holidays.

Similarly, the weekly air passenger count crashed 21% in the past two weeks, or down nearly 4 million passengers. In fact, it has maintained the strong momentum from a record-setting 2025. Through 15 days, it’s 3.8% above 2025 and 9.7% above 2019.

As a reminder, on slide 4 (available in the full report), we marked the indicators impacted by the federal government shutdown in red and changed the trend to “Ø” once a data release was missed since a stale trend can’t be relied upon. It’s now down to just two indicators – personal income and personal spending, although several are still lagged by more than a month.

Our take

Economic data remains impacted by the federal government shutdown, whereby approximately 1.4 million unpaid civilian federal workers were furloughed or worked without pay. That caused sloppy economic data trends, complicating decisions for markets and policymakers.

Additionally, the delay in the economic data due to the government shutdown has been its own challenge, although it’s quickly catching up. Combined, the shutdown of the federal government was a double-whammy for the economy.

Nonetheless, the deluge of backlogged data continued this past week, including a few that released data for multiple months simultaneously. For instance, new home sales for September and October were released, along with wholesale prices for October and November. Alas, these and several others remain more than a month in arrears.

The last economic data holdouts are personal income and personal spending, which provide insights into changes in income, spending, and personal savings. Those will be released next week, but that, too, will remain delayed since the report will only cover data through November.

The upside is that much of the incoming economic data has remained solid, perhaps even improving. Retail sales are the best example, recovering in November to a fresh all-time high after dipping in October.

Likewise, the newest inflation readings were well behaved, thanks in part to lower gasoline prices. However, hereto, we’re dealing with mismatched data as consumer inflation is current through December, but the aforementioned wholesale prices are through November. The December wholesale figures will be released in two more weeks.

This is why we’ve been saying that we probably won’t see a clean view on the economy until mid-February. Yet not all of the economic data is sunny – the obvious exceptions remain housing and manufacturing. Housing has been challenged by affordability, which is less about mortgage rates and more about home prices. Not that rates don’t matter or that lowering them won’t help some borrowers, but existing home prices are up 47.8% since December 2019 (see slide 13, available in the full report). A real-time example of this is what’s happening on the new home side (see slide 14, available in the full report). Prices are “only” up 19% since December 2019 and average mortgage rates for new homes are at roughly 5% nationally because homebuilders have been buying down the rates for the past two years (since the Fed started aggressively hiking rates). Meanwhile, new home sales really haven’t budged. 

Bottom line

The U.S. economy remains resilient, but the data is still muddied by the government shutdown, which has created distortions and delays. We likely won’t get a clear read on the economy until sometime in mid‑February. Nonetheless, we expect an uptick in U.S. growth to 2.3% in 2026 thanks to four primary drivers – tax incentives for consumers and businesses, marginally lower borrowing costs thanks to Fed easing, steadier trade policy and tariffs, and continued investment in AI and technology spending.