The U.S. government shutdown is causing a data blackout that is leaving Wall Street traders and investors in the dark. The Labor Department will not release the closely watched monthly jobs report on Friday due to the shutdown. This is a major problem for those trying to read the economy.
The jobs data is considered the king of the numbers and is crucial for understanding the labor market and the Federal Reserve’s rate-cutting plans. “Usually economists and strategists are dialed in at 8:30 in the morning; now you can potentially get some other work done,” said Matthew Miskin of Manulife John Hancock Investments. “It’ll be nice to have a Friday morning where your eye’s not twitching waiting minutes until that jobs report hits.”
But the lack of data is also causing sleepless nights for some.
Commodities trader James Cordier said he might have to close trades early if the data drought lasts too long, as the risk of keeping them open is too great. The shutdown is also likely to make traders more jumpy. “Investors will fill the informational void left by the government shutdown with new trading narratives based on incomplete and misleading private-sector data releases, unfounded anecdotes, and flimsy rumors,” warned Karl Schamotta of Corpay.
Government shutdown impacts financial markets
“The risk of overreaction will grow.”
The timing of the data disruption is particularly awkward, coming just weeks after a shockingly weak jobs report prompted President Trump to fire a top Labor Department official. “A few weeks ago we were questioning the accuracy of the data, and now all of a sudden we can’t live without it,” noted Michael Arone of State Street Investment Management.
For Interactive Brokers Chief Strategist Steve Sosnick, who frequently appears on financial news shows to break down the jobs report, Friday will be different. “I’ll just sleep in,” he joked about his plans. The lack of jobs data could also have a domino effect on interest rates in both the U.S. and Canada.
If the Fed doesn’t have reliable labor market data, it may keep rates steady despite pressure to cut them. This in turn could cause the Bank of Canada to freeze rates as well. The longer the shutdown drags on, the bigger the economic impact could be on both sides of the border.
Past shutdowns have shaken investor and consumer confidence. While Canada may be somewhat insulated this time due to reduced trade with the U.S., a prolonged shutdown and lack of data is still a major concern for economists and investors trying to navigate an uncertain economy.
