US: Federal Gov't Shutdown: Payrolls, CPI Data Postponements Loom (1/2)

Amid the US federal government "shut down" starting today, we answer some of the most frequently asked questions we've received from clients.

• How long will it last? Prediction markets yesterday were signalling there's a higher than 50% market-implied chance that it lasts more than 5 days, and 40% it lasts more than 10 days. This would be the first full (and not "partial") shutdown since 2013 - that one lasted from Oct 1 to Oct 16 (regular operations resumed Oct 17).
• How will this impact data releases? With only essential government services being performed during a shutdown, this would effectively mean that any data from federal agencies including the Bureau of Labor Statistics, Bureau of Economic Analysis, and other agencies (commodities data via Dept of Agriculture and Dept of Energy) would be postponed until after the end of the shutdown. There would also be potential delays to subsequent releases as data collection is not able to be conducted.
• What are the data releases that are set to be postponed? The two key data releases that would be impacted by a shutdown through mid-month are Friday's Employment report for September, and the CPI report on Oct 15 (and PPI the next day). All the other not-quite 1st tier data, from construction spending to housing starts to trade balance, would also not be published (thankfully, the week of Oct 6 - 10 is unusually light). The Department of Labor's shutdown plans suggest there will be no weekly jobless claims reports published. These were published in 2013's shutdown, as while they were compiled and released by the BLS, they use state-by-state data. We go through the 2013 episode in more detail in the next note by way of illustrating what it could look like this time.
• What data will we get? Private-sector compiled data will still be released after September 30, and this will serve as an alternative of sorts to the official government data to gauge economic developments. Looking at the more immediate releases: for the labor market, this includes the ADP employment report and Challenger job cuts out this Wednesday and Thursday. For broader activity, we get ISM Manufacturing / Services (Weds and Fri). For retail sales we get indicators including the weekly Redbook release and Wards Automotive sales. Also Federal Reserve releases including the regional Fed surveys would be unaffected: in the 1st half of the month that includes NY Fed consumer survey and manufacturing surveys, as well as the Federal Reserve Beige Book.
• When would data releases resume? In 2013, releases were pushed back to slightly after the end of the shutdown. That meant that there were some odd days of the week: the September 2013 payrolls data for example came out on Tuesday Oct 22 (instead of Fri Oct 4). The Department of Labor's notice summarizes the impact of a federal shutdown: "BLS will suspend all operations. Economic data that are scheduled to be released during the lapse will not be released.... The BLS website will not be updated with new content or restored in the event of a technical failure during a lapse. The releases of economic data will likely be delayed if a lapse is prolonged." See the table the BLS provided in 2013 after the shutdown ended to get a sense of the impact of delays.
• Will Treasury auctions be affected? These are considered "essential" and will be conducted as normal. However, bill auctions have already been increased for this week. 4-week by $5B to a record $105B, 8-week also by $5B to a joint-record $90B, and 4-month by $2B to a record $67B. Instead of raising $5B in net cash if they had been unchanged, these will raise $17B on next Tuesday Oct 7's settlement.