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The longest government shutdown in US history ended last night after Congress passed a bill that quickly signed the lawto restore government functions and resume normal activities. But one key impact will continue to be felt for me.what's still to come.
During the 43-day shutdown, key economic data was not collected and the release of key economic indicators was delayed.
In fact, the White House is now saying employment and inflation data for October may never be released due to the shutdown.
“All of this published economic data will be permanently skewed, leaving our policymakers at the Fed blind during a critical period,” White House press secretary Caroline Leavitt said, referring to the Federal Reserve, the U.S. central bank.
The lack of data has already cast a cloud of uncertainty over the state of the U.S. economy, meaning businesses and policymakers alike don't know for sure what's going on.
“Our view of the economy is based more on rumors than on verified information,” said Carl Sciamotta, chief market strategist at financial services company Corpay.
He says economists and businesses relied on private sector data such as credit card data, satellite imagery and research.
Chamotta says the fog came at a crucial time. The trade war between the United States and Canada has caused deep uncertainty and intense debate about whether, how and when tariffs will slow the American economy.
US President Donald Trump said the tariffs do not cause inflation and will help the economy rather than hurt it.
But economists say tariffs are driving up costs while creating deep uncertainty that puts pressure on investment and hiring.
Without clear and reliable data, people may say that the economy is fine or that inflation is not rising because there have been no reports to contradict them.
“Ultimately, it just leads to a fog of uncertainty into which you can project anything. It's like a Rorschach test for understanding macroeconomics,” Sciamotta said, referring to a psychological test in which participants describe what they see in various ink blots.
It's like a Rorschach test for understanding macroeconomics.– Carl Chamotta
For example, this week the director of the White House National Economic Council, Kevin Hassett, was criticized by the hosts of the financial news channel CNBC.
Hassett said he believes inflation is approaching the Federal Reserve's target.
“Even though it has been growing for five straight months as of September?” asked CNBC anchor Carl Quintanilla.
Hassett brushed it off and pointed to available data for January.
“I think if you look at January, you see ups and downs and seasonality. But yes, it was surprising on the other side. People were expecting an acceleration, but it didn't happen,” he said.
Tim Dye, chief US economist at SGH Macro Advisors, tweeted Hassett's statement, noting that the government has no way of knowing whether inflation has accelerated or not.
“But, but… we are not collecting data while the government is closed,” he tweeted.
During Trump's first term, his tariffs on steel and aluminum took about eight months to actually hit the U.S. economy and show up in the data.
In this term, he began introducing tariffs in March – or about eight months ago.
“We risk reaching a point in the next couple of months where new data comes out that shocks markets so much that we see a broader spike in volatility or negative impacts on the economy,” Sciamotta said.
Economists warn it will take some time to get even basic data back up and running.
Oxford Economics says nearly two dozen key reports have been delayed. He warns that the list will continue to grow as agencies try to catch up.
And this poses at least one pressing political conundrum. The Federal Reserve will have to make a decision on interest rates next month.
Currently, there is no consensus at the Fed on the direction of the US economy. Some EU members are pushing for further interest rate cuts, while others are calling for caution over fears that inflation could rise again this autumn.
The Fed is “still stuck in a data fog,” writes Nancy Vanden Houten, lead US economist at Oxford Economics.
This fog will hang over the US economy for several months. It's possible that in the new year, economists, businessmen and politicians will have reliable data that will shed light on where the economy really is.
