Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The government shutdown started at midnight on Wednesday, but it'll
Speaker 2: take a while to feel its full impact. Grebory Cordy
Speaker 2: covers the White House for Bloomberg, and he says, shutting
Speaker 2: down the US government is a process.
Speaker 3: Actually coming into work on Wednesday morning, there's more traffic
Speaker 3: in DC than there's been in a long time in
Speaker 3: this sort of post COVID world that we're in, because
Speaker 3: federal workers who have been working from home have to
Speaker 3: come in to shut down the government, lock away their files,
Speaker 3: put their out of office on meet with their boss
Speaker 3: one last time, make sure everything's set before they can
Speaker 3: go back home and be furloughed.
Speaker 2: And it's at that point, Gregory says, when you and
Speaker 2: I will start to feel the effects of a government
Speaker 2: shut down in earnest. You'll call a government office with
Speaker 2: a question and no one will pick up. Some scientific
Speaker 2: research will stop, and agencies that collect and disseminate data
Speaker 2: will stop doing that vital work.
Speaker 3: I will give you one example of a very specific
Speaker 3: way that this could impact seventy million Americans, and that
Speaker 3: is that the October Consumer Price Index number is essential
Speaker 3: for the social security Administration to compute the cost of
Speaker 3: living adjustments for retirees who depend on social ob security benefits.
Speaker 3: Social karement Administration has not said how they're going to
Speaker 3: do that. If they're missing a month's worth of data,
Speaker 3: will they just use eleven months? Will they delay it?
Speaker 3: That just a routine use of government data that happens.
Speaker 3: People don't think about it. But all of these mechanisms
Speaker 3: are built on government data, and if you don't have
Speaker 3: the government data, then you can't adjust for inflation.
Speaker 2: Policymakers at the Federal Reserve also rely on those inflation
Speaker 2: numbers and on data about the labor market. The latest
Speaker 2: monthly jobs numbers were scheduled to be released on Friday,
Speaker 2: but because of the government shutdown, they won't be Molly
Speaker 2: Smith is an economics editor at Bloomberg, and she says
Speaker 2: this is likely to make the Fed's next rate decision
Speaker 2: at the end of October all the more complicated.
Speaker 1: Remember, the Fed just lowered interest rates for the first
Speaker 1: time this year. They've been thinking okay, Inflation has been
Speaker 1: running still well above target, but the last jobs reports
Speaker 1: seem to suggest that the labor market is starting to
Speaker 1: really falter a bit, and that We've got to do something.
Speaker 1: And that's what all of this has been hinging on about.
Speaker 1: Expectations for another two cuts this year, expectations for any
Speaker 1: next year. It's really all about the labor market and
Speaker 1: that so depends then on what the government's data says.
Speaker 2: I'm David Gera and this is the big take from
Speaker 2: Bloomberg News Today on the show. A government shutdown impacts
Speaker 2: the economy and economic data. What that means for policymakers, investors,
Speaker 2: and everyday Americans who depend on it. The last government
Speaker 2: shutdown started in December of twenty eighteen, lasted for thirty
Speaker 2: five days. Donald Trump was the president, and there's been
Speaker 2: a string of them, more than a dozen shutdowns since
Speaker 2: Ronald Reagan was in the White House. But when I
Speaker 2: sat down with Bloomberg's Gregory Cordy and Molly Smith, Gregory
Speaker 2: told me this one is unique.
Speaker 3: It feels different for a number of reasons. One is,
Speaker 3: we've seen more political poorization. We have Congress as closely
Speaker 3: divided as it's ever been in its history, just in
Speaker 3: terms of the division between Republicans and Democrats. But it's
Speaker 3: also different because this is a Trump shutdown in his
Speaker 3: second term, where President Trump has decided to do things
Speaker 3: a little bit differently, and so this shutdown, he has
Speaker 3: threatened to not just furlough federal workers, but look for
Speaker 3: ways to fire them. In the first hours of the shutdown,
Speaker 3: the Department Transportation used as an excuse to freeze eighteen
Speaker 3: billion dollars worth of infrastructure funding for New York City
Speaker 3: on the pretext that, well, you know, we don't have
Speaker 3: the Department of Transportation contracting officials that can release this money.
Speaker 3: So there may be a number of things where these
Speaker 3: were things the government did that the Trumpet administration didn't
Speaker 3: particularly enjoy doing in the first place, and the shutdown
Speaker 3: gives them a very convenient excuse not to do that.
Speaker 3: In the meantime, the things that they want to do,
Speaker 3: they have found ways to do them. And so one
Speaker 3: of the things that we found looking through these shutdown
Speaker 3: plans is it looks like fewer federal employees will be
Speaker 3: furloughed because they've gotten creative in finding other sources of
Speaker 3: funding and finding sort of new legal interpretations to say,
Speaker 3: even though the law says Congress has said we can't
Speaker 3: spend money if it hasn't been appropriated by Congress. These
Speaker 3: are essential functions. They've they've broadened that definition to allow
Speaker 3: more federal workers to show up to work even though
Speaker 3: they won't get paid until the shutdown ends.
Speaker 2: Molly, it's at moments like this one when I think
Speaker 2: a lot of Americans become acquainted with or reacquainted with
Speaker 2: all that the federal government does and how it interfaces
Speaker 2: with with their lives. Economic data is a part of that.
Speaker 2: We think about what the Labor Department does or the
Speaker 2: Congress Department, but really all of these agencies are producing
Speaker 2: data that's important. Could you just describe some the impact
Speaker 2: of government shutdown has on their ability to collect and
Speaker 2: disseminate that data.
Speaker 1: So this totally ceases operations across these federal agencies, and
Speaker 1: we've seen that in the most recent contingency plans that
Speaker 1: the Department's released going into this shutdown. So for the
Speaker 1: Buerau of Labor Statistics, which is housed within the Labor Department,
Speaker 1: this is the one where we would get the employment
Speaker 1: report from every month, where we would get the main
Speaker 1: consumer price index, that's the key inflation gage that we
Speaker 1: look to every month. These reports will not be coming
Speaker 1: out on time as scheduled. All of these data releases
Speaker 1: are going to be delayed, including the upcoming jobs report
Speaker 1: that was supposed to be scheduled for this Friday. So
Speaker 1: it really just casts an even bigger cloud over the
Speaker 1: state of the economy right now because federal data is
Speaker 1: really regarded as the gold standard for how to gauge
Speaker 1: what's happening in the economy.
Speaker 2: Could you just sort of help us understand how these
Speaker 2: economic data are used across the economy broadly.
Speaker 1: Yeah, So the big one, obviously for people who listened
Speaker 1: to Bloombergy, is going to be whatever the Federal Reserve
Speaker 1: has to say. So everyone's really wondering, then if this
Speaker 1: shutdown does last into those latter stages that we have
Speaker 1: a Federal Reserve meeting at the end of this month,
Speaker 1: will they have the latest jobs report by then? Will
Speaker 1: they have the latest CPI by then? Will they have
Speaker 1: everything else that the BLS puts out that the agencies
Speaker 1: within the Commerce Department, like the Census Bureau and the
Speaker 1: Bureau of Economic Analysis puts out We just don't know yet,
Speaker 1: but it affects every day Americans too.
Speaker 2: You know.
Speaker 1: Economic data is maybe it's not something that regular people
Speaker 1: are using day to day, but in certain industries and
Speaker 1: business planning, and really all levels of government, in all
Speaker 1: levels of decision and investment making. This is so crucial.
Speaker 1: A lot of people who work in construction or urban
Speaker 1: planning would want to know what kind of estimates there
Speaker 1: are if you were trying to do some kind of
Speaker 1: new residential or commercial construction project, for example, and you
Speaker 1: want to gauge what the local demographics are like to see, well,
Speaker 1: if we're going to be building an apartment complex, who
Speaker 1: lives in this area, what kind of wages do they make,
Speaker 1: what kind of commute do they do to work. This
Speaker 1: is all things that federal data point us to.
Speaker 2: Gregre I know you've been sifting through contingency plans that
Speaker 2: we've seen from omb the way that the federal government
Speaker 2: is thinking about how the shutdown might unfold. When you
Speaker 2: look at pass shutdowns, what can we learn, what can
Speaker 2: we ascertain from how they approached the release of data,
Speaker 2: the collection of data, this particular facet of what the
Speaker 2: federal government does.
Speaker 3: Well. One thing that's different this time is this is
Speaker 3: the first shutdown that we've had since the Obama shutdown
Speaker 3: of ten fifteen years ago that has happened at the
Speaker 3: beginning of a fiscal year, and so we all know
Speaker 3: the data comes out of the first of the month.
Speaker 3: The last time we had a long shutdown, it was
Speaker 3: over the holidays. It was kind of sleepy. That was
Speaker 3: pre COVID. I don't think the FED was watching the
Speaker 3: jobs numbers quite as closely as they are this time around,
Speaker 3: and so frankly, a lot of federal data didn't come
Speaker 3: out in previous shutdowns, and people didn't miss it quite
Speaker 3: as much. It's as much about this economic moment that
Speaker 3: we're in as it is about the shutdown. But also
Speaker 3: remember there's a backdrop here where President Trump had fired
Speaker 3: the commissioner of the Bureau of Labor Statistics, has not
Speaker 3: been happy with the data that he's getting out of
Speaker 3: the Labor Department anyway, and so a shutdown means we
Speaker 3: don't get the data. But it also means for President
Speaker 3: Trump that there's no chance of bad news coming out
Speaker 3: of his administration on the labor market, at least as
Speaker 3: long as there's a shutdown. And of course that will
Speaker 3: catch up eventually, and those jobs numbers that we get,
Speaker 3: when we do get them, will include a good number
Speaker 3: of maybe seven hundred and fifty thousand federal employees who
Speaker 3: will be unemployed during that stretch, not to mention maybe
Speaker 3: another one hundred and fifty or more federal employees who
Speaker 3: took the deferred resignation program that expired at the beginning
Speaker 3: of this physical year. As of Wednesday, those are now
Speaker 3: the federal payroll, and so there are going to be
Speaker 3: a number of shocks to the next jobs report when
Speaker 3: we get.
Speaker 2: It coming up. What it'll mean for the Federal Reserves,
Speaker 2: specifically not having new data on the US economy and
Speaker 2: what policymakers, economists, and investors will rely on instead of
Speaker 2: those government reports. The Federal Reserve's rate Setting Committee is
Speaker 2: scheduled to meet next on October twenty eighth and twenty ninth,
Speaker 2: and that'll happen whether or not the government is open.
Speaker 2: In September, FED Chair Jerome Powell signaled he and his
Speaker 2: colleagues are open to another rate cut this year, but
Speaker 2: that will depend on the latest data, especially data on
Speaker 2: the jobs market.
Speaker 1: We're in a meeting by meeting situation.
Speaker 2: We're going to be looking at the data. The FED
Speaker 2: has been dealing with policy uncertainty whether it should cut
Speaker 2: rates and if so, by how much, But it's also
Speaker 2: been facing personnel uncertainty. On Wednesday, the Supreme Court, which
Speaker 2: also stays open during government shut down, said President Trump
Speaker 2: can't fire FED Governor Lisa Cook immediately. The court will
Speaker 2: hold oral arguments in January. I asked Bloomberg's Molly Smith
Speaker 2: about how the FED is handling all of this uncertainty.
Speaker 1: It's a really feisty time at the FED right now,
Speaker 1: which is I feel like, not a word we use
Speaker 1: a lot to describe the FED. You know, it's usually
Speaker 1: the FED as well as some of these other agencies
Speaker 1: that I've named, tend to be you know, they function
Speaker 1: best when you don't really hear about them. But there's
Speaker 1: just been so much changeover at the FED recently, obviously
Speaker 1: with Lisa Cook's position. We had a different FED governor
Speaker 1: resign recently and that opened up a spot for Stephen
Speaker 1: Myron to come into. So that was one of Trump's
Speaker 1: top economic advisors who recently just joined the FED. Of course,
Speaker 1: we have Chair J. Powell's term ending next year. There
Speaker 1: are all these moving parts right now that I think
Speaker 1: this maybe adds a little bit of stability the time
Speaker 1: when there hasn't been a lot of stability at the FED.
Speaker 1: So I'm sure, there's going to be so much more
Speaker 1: on this to come that I don't think we've heard
Speaker 1: the last of what's happening with Lisa Cook yet.
Speaker 2: When FED policymakers gather in Washington at the end of
Speaker 2: the month, they're going to review all the economic data
Speaker 2: they have, and I asked Molly what they'll rely on
Speaker 2: if they don't have a new jobs report or a
Speaker 2: new CPI report.
Speaker 1: So there are a lot of other companies that they
Speaker 1: basically will look at their own metrics of their payroll
Speaker 1: providers like ADP is one of them. Revellio will scrape
Speaker 1: through job profiles online LinkedIn and indeed do similar metrics
Speaker 1: using their own job platforms. This is basically what we're
Speaker 1: left with. We just saw a metric from ADP about
Speaker 1: their employment gauge in the month, which a lot of
Speaker 1: economists typically don't like to look to already because it
Speaker 1: doesn't closely align with what the BLS puts out. And
Speaker 1: then on top of that, they had some issues adjusting
Speaker 1: the data this time around, so that made it even
Speaker 1: more difficult to interpret. But there are some other sources
Speaker 1: that compile announcements on layoffs, so I would say it's
Speaker 1: most expansive on the labor market side. There are a
Speaker 1: few on the inflation side too. We do get some
Speaker 1: others on consumer spending. Probably the best of what we
Speaker 1: see is on the housing side. The National Association of
Speaker 1: Realtors is usually the go to source for sales of
Speaker 1: existing homes in the US, and that's based on contract closings,
Speaker 1: and they also do a leading indicator based on contract signings.
Speaker 1: So we still do get a decent amount of housing data,
Speaker 1: granted not on the new homes or residential construction side.
Speaker 1: That all comes from Census. And we do have all
Speaker 1: these private sector sources, but a lot of them rely
Speaker 1: on what the government has to say. They don't operate
Speaker 1: totally independently of what the beer of Labor Statistics has
Speaker 1: to say. So, needless to say, there are still holes.
Speaker 1: They're just not going to add up to be the
Speaker 1: full picture we'd have otherwise.
Speaker 2: How did you read the numbers from ADP this morning
Speaker 2: a miss compared to what the media and estimate was
Speaker 2: saw revision from the last period as well. What does
Speaker 2: that tell you bearing in mind what you just said,
Speaker 2: which is it's not going to give you the same
Speaker 2: picture that the Labor Department data would.
Speaker 1: It was a particularly challenging ADP report to dissect because
Speaker 1: they also then used a separate measure from the BLS
Speaker 1: to readjust their data, so that resulted in the payrolls
Speaker 1: dropping as much as they did. They fell thirty two
Speaker 1: thousand in the month of September just for reference. Economists
Speaker 1: that Bloomberg had surveyed had put in immediate estimate of
Speaker 1: a gain of fifty one thousand, So it was a
Speaker 1: bit challenging to get through to see what this meant
Speaker 1: with the data methodology. Some economists even said they couldn't
Speaker 1: totally make sense of it, and it just made it
Speaker 1: even more difficult to rely on what ADP has to say.
Speaker 1: Granted if you just take a step back, though, I
Speaker 1: don't think this changes the overlying trend that we're seeing
Speaker 1: in the labor market, that it is weakening, that we
Speaker 1: are seeing pay gains soften, we are seeing hiring slowed down,
Speaker 1: there's less demand for workers. I think right now the
Speaker 1: question is just the speed of which that's happening.
Speaker 2: At Gregory, I'm curious sort of how policymakers in Washington
Speaker 2: are reacting or not reacting to this shutdown. I don't
Speaker 2: think that we've gotten a statement from the Federal Serve,
Speaker 2: for instance, or from any of these agencies that goes
Speaker 2: beyond just the kind of contingency plans they're putting in place.
Speaker 2: But what's the reaction, ben broadly is, as you've watched
Speaker 2: this unfold over the last twelve hours or so, you know.
Speaker 3: The thing about shutdowns is, I think we've just kind
Speaker 3: of got inured to them somewhat. This is the case
Speaker 3: where we have Congress unified control by Republicans, we have
Speaker 3: Republican president, but Republicans don't have that supermajority in the
Speaker 3: Senate that allow them to get past a possible Democratic filibuster.
Speaker 3: It's a symptom of our polarization, but also some very
Speaker 3: strong personalities here with Chuck Schumer and Hakeem Jeffries and
Speaker 3: President Trump. We need to stop these premiums from going
Speaker 3: up dramatically. We need to do it now. We're in
Speaker 3: the midst of an incredible crisis, a healthcare crisis that
Speaker 3: Republicans have caused.
Speaker 1: Could be because the Democrats are they don't know what
Speaker 1: they're doing.
Speaker 3: They are dug in and it's very difficult to see
Speaker 3: where the off ramp is.
Speaker 2: This is a game of chicken, Molly, to borrow phrase
Speaker 2: from Gregory here, inured? Is Wall Street likewise inured when
Speaker 2: it comes to these shutdowns, or are we seeing markets
Speaker 2: react to prospect of this unfolding differently the prospect of
Speaker 2: they're being perhaps massive layoffs that unfold during the course
Speaker 2: of the shutdown.
Speaker 1: I was going to piggyback on that point anyway, because
Speaker 1: this is just like something we're all just like, oh, okay,
Speaker 1: here we go again. But as far as the market reaction,
Speaker 1: I haven't really seen much of one, I think, And
Speaker 1: that kind of also speaks to the fact that like, yeah,
Speaker 1: we know the drill, we've seen how this shakes out,
Speaker 1: but we don't know how long this is going to go,
Speaker 1: what other services are going to be affected by this,
Speaker 1: how much data is going to go buy that we
Speaker 1: won't see. So I think it's still a little early
Speaker 1: just to gauge how Wall Street's feeling about it.
Speaker 2: We've talked awful lot about economic data, and Molly, let
Speaker 2: me ask you lastly just about the economy, and you've
Speaker 2: mentioned how the labor market is showing signs of cracking.
Speaker 2: Their issues with it. As Gregory brought up, there is
Speaker 2: the very real prospect here that we won't just see
Speaker 2: furlough as we're going to see layoffs as a result
Speaker 2: of this shutdown. What does that mean for the economy
Speaker 2: as you kind of forecast out and think about the
Speaker 2: impact that could have on as you've described it, very
Speaker 2: fragile US economy.
Speaker 1: I mean, Gregory raised a great point too, that we
Speaker 1: were already expecting to see federal government employment fall in
Speaker 1: the next jobs report because of what he had said
Speaker 1: with the deferred resignations offer, is that if you had
Speaker 1: accepted one of those, September was the last month you
Speaker 1: would be on payroll. So the October jobs report will
Speaker 1: show the impact of that. So just if we have
Speaker 1: that many more layoffs as a result of this shutdown,
Speaker 1: it's just going to exacerbate that. Whether that ripples out
Speaker 1: to the broader economy, though, still really remains to be seen.
Speaker 3: Keep in mind also that contractors, federal contractors could be effected,
Speaker 3: as we're seeing in the New York City example, where
Speaker 3: the Department Transportations frozen money for the second Ave Subway
Speaker 3: and the Hudson Tunnel project. And so that's eighteen billion
Speaker 3: dollars worth of construction that at the very least is
Speaker 3: going to be delayed. And you know, when you are
Speaker 3: a contractor, you very often live job to job and
Speaker 3: paycheck to paycheck. So if the Trump administration extends this
Speaker 3: shutdown to say, hey, look, you know we don't have
Speaker 3: the contracting officers that can provide for infrastructure projects in
Speaker 3: key places across the country, there could be a little
Speaker 3: bit of a domino effect there as well.
Speaker 2: This is the Big Take from Bloomberg News. I'm David Gurra.
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Speaker 2: Thanks for listening. We'll be back tomorrow.