Government shutdowns cause all sorts of problems: Furloughed employees, permitting delays and, of course, insufferable partisan bickering. This latest installment, however, comes at a precarious moment. The Federal Reserve is charting a new course for interest rates, and the economy may be at an inflection point. In September, the Fed cut interest rates for the first time in 2025 amid sputtering job growth, an uptick in the unemployment rate, and the threat of reaccelerating inflation.

But it may be a while before we know what’s going on in the economy. The government shutdown will delay the collection and dissemination of economic data, including the September jobs report originally scheduled for Friday. This is not ideal.

The Department of Labor, which houses the Bureau of Labor Statistics (BLS), announced contingency plans in the event of a shutdown. Under those plans, the BLS will “suspend all operations,” including economic data releases and collection activities.

At best, a short government shutdown would minimally delay the publishing of the most up-to-date reading on the labor market and other economic indicators. The jobs data for September are already compiled, as are most – if not all – of the data for September’s consumer price index scheduled to be released on October 15. Once the government reopens, the data should be published quickly.

It’s a prolonged shutdown that’s the real problem. In that scenario, the BLS warned there could be a reduction in the quality of data collected that could impact the accuracy of future estimates.

Spotting an inflection point is already exceedingly difficult – just ask the Fed about “transitory” inflation. It’s even more difficult to spot when there is an erosion in data quality. Worse, a lengthy shutdown could push data releases past the Fed’s late-October meeting. The potential for an extensive data blackout could leave members of the Federal Open Market Committee flying blind – and having to rely on less comprehensive labor and inflation data from the private sector such as ADP and Truflation – as they consider their next move on interest rates. The likelihood of policy missteps that leave them behind the curve and having to play catch up is increasing.

Freddy’s Forecast: September Jobs (Whenever we get them)

The August jobs report showed a beleaguered labor market as employers added just 22,000 workers to their payrolls while the unemployment rate ticked up to 4.3 percent. Average hourly earnings rose by 10 cents, or 0.3 percent, for an annual gain of 3.7 percent.

The weak headline number was the latest in a string of softer reports. June nonfarm payrolls were revised down by 27,000 and showed job losses of 13,000. It was the first decline since December 2020. August private-sector job growth led the way, up 38,000 for the month, which almost exclusively came in the health care and social assistance sector and leisure and hospitality. Meanwhile, manufacturers continued to shed jobs, slashing another 12,000 workers from their payrolls in August. Manufacturers have cut 42,000 following the “Liberation Day” tariff announcement in April.

September data from payroll processor ADP showed private-sector employers cut headcount by 32,000 during the month. Both goods-producing and service-providing industries cut jobs by 3,000 and 28,000, respectively. The leisure and hospitality sector cut the largest number of jobs (-19,000). The construction (-5,000) and manufacturing (-2,000) sectors also cut jobs. Education and health services employers added 33,000 to their payrolls and was among the few bright spots in this report. The data from ADP may be the timeliest data available to the Federal Reserve at its late-October meeting if the government fails to reopen in time for the BLS to publish the monthly employment report.

Initial jobless claims spiked at the beginning of the month to 264,000 for the week ending September 6 but have since receded to 218,000 as of September 20. Continuing claims also declined somewhat in recent weeks but remained above the 1.9 million level during the week ending September 13 at 1.926 million. The latest claims data for the week ending September 27 will be delayed until the end of the government shutdown.

The JOLTS report – which, if the government shutdown is prolonged, could be the last government reading on the labor market before the Fed’s October meeting – confirmed that businesses remained reluctant to hire or fire. Job openings held steady at 7.2 million in August. Hiring, meanwhile, slowed to 5.1 million from 5.2 million in the prior month. The report also showed that the ratio of job vacancies to unemployed workers continued to fall, dropping from 0.996 in July to 0.979 in August, the lowest since April 2021 when the ratio was 0.96. The ratio has steadily declined since reaching 2.02 in March 2022.

Data from the Institute for Supply Management showed that manufacturing continued to slow in September, albeit at a slower pace than in August. The employment index ticked up during the month but remained well in contraction territory. The production index was one of the bright spots in the report, flipping from contraction to expansion. Survey respondents continued to express concerns over tariffs and having to pass on cost increases to customers. One respondent stated that “steel tariffs are killing us,” while another explained that tariffs were being passed on “via surcharges, raising prices up to 20 percent.”

For the September report – whenever it’s published – expect topline payroll growth of 48,000. The unemployment rate is likely to tick up to 4.4 percent while growth in average hourly earnings increases to 0.3 percent, or 11 cents, for an annual gain of 3.7 percent.