Missing Data Leaves Economy ‘Flying Blind’

It’s a ritual that economists, investors and businesses eagerly anticipate the first Friday of each month – checking to see how many people joined or left the labor market.

But last Friday morning, they instead found this simple announcement on the Bureau of Labor Statistics page: “This website is currently not being updated due to the suspension of federal government services.”

The BLS report is considered the gold standard of labor data, and its omission or delay comes at a crucial time for the economy. In recent months, the data has been confirming a sharp slowdown in the job market, with only 22,000 new jobs created in August and an expectation of another 50,000 or so added in September.

The data is key to whether the Federal Reserve will continue its policy of lowering interest rates, which started last month with a quarter-point cut in the central bank’s overnight lending rate. That rate is a catalyst for a broad range of interest rates that determine how much interest you pay on a car loan or a mortgage.

Markets are keyed in on the idea of the Fed lowering rates twice more this year, which would be more oxygen for stocks that are already trading at all-time highs.

There are labor data alternatives from the private sector, but nothing has quite the gravitas of the BLS, which has been issuing reports on the health of the job market since 1915. And the alternatives have been sending mixed signals of late.

BLS data is also used to compile the monthly consumer price index, a key measure of inflation. The September CPI release is set for Oct. 15, but it may also be delayed if the government shutdown goes beyond this week.

The Fed is facing the tricky balance of propping up the job market while avoiding any increase in inflation. It now may be tasked with deciding a next move without trusted labor or inflation data when it meets Oct. 28.

“The Federal Reserve, U.S. Treasury, financial markets, businesses and households will be flying blind,” says Erica Groshen, who was the BLS commissioner the last time the labor report was withheld during a government shutdown in 2013. “They will be less certain of current conditions at what could be the beginning of a recession – precisely when their decisions are most consequential.”

The delayed report is not the only issue facing the BLS. After the economy added 73,000 jobs in July, a weaker-than-expected performance, and common seasonal revisions lowered the number for the prior two months, President Donald Trump fired BLS chief Erika McEntarfer. He then nominated a conservative economist with little of the experience normally found in such nominees, which prompted widespread criticism and led to Trump pulling the nomination.

At the same time, staffing at the BLS has been sharply reduced, and response rates to its surveys – still done by phone for the labor data and by manual surveys at stores for the CPI – have been on a downward trend.

The actual data for the September jobs report has been collected and processed, a fact that prompted Massachusetts Democratic Sen. Elizabeth Warren to call on the Office of Management and Budget to release it.

“The economy could be at an inflection point,” Warren wrote to OMB Director Russell Vought. “Withholding this data would undermine the Fed’s ability to make informed decisions that affect every American household through interest rates, the job market, and price stability.”