The Biden administration has confirmed that the government's usual firehose of economic information is set to abruptly cease if a shutdown this weekend goes forward, with potential effects expanding all the way to the Federal Reserve's next interest rate decision in November.
The Bureau of Labor Statistics (BLS) is the hub of much of the government's data and will “completely cease operations” in the event of a shutdown, sending all 2,350 employees home, according to a newly released contingency plan.
That means both the September jobs report next Friday and the Consumer Price Index (CPI) reading set for Oct. 12 would not be released during any stoppage, a White House official confirmed to Yahoo Finance.
Another key source of government data is also likely to stop as the Commerce Department's Bureau of Economic Analysis (BEA) also plans to stop operations and only keep 10 staff members working during any shutdown. That agency publishes the Personal Consumption Expenditures price index — widely known as the Federal Reserve's preferred measure of inflation — and releases estimates of gross domestic product.
Other data is also set to be at least temporarily postponed if the gridlock on Capitol Hill continues. Weekly unemployment insurance claims tallied by the BLS are set to halt. Most work from the Census Bureau will also cease during a stoppage, including data around the economic census, economic indicators, and the American Community Survey.
It's a looming information shutdown that could have wide-ranging effects and be felt by economists both inside and outside of the Federal Reserve who are closely charting the direction of the economy. Even Social Security recipients may feel some impacts down the road when it comes to adjustments to their 2024 benefits.
Potential effects for Social Security's cost of living adjustment
The Social Security program announces its annual cost-of-living adjustment for recipients each year in October, with elements of September's CPI report traditionally serving as the final data point in its adjustments.
In its own contingency plan released last month, the Social Security Administration announced that three of its 50 actuaries on staff would remain on the job during a shutdown in order to “complete necessary work to update the cost of living adjustment.” But it remains unclear if the agency would go ahead with an adjustment during a shutdown.
Biden officials didn’t offer clarity in response to requests from Yahoo Finance on how the cost-of-living adjustment process could be impacted.
In any case, Americans can be assured of continued Social Security checks during any stoppage. They should also be able to access basic Social Security services. Those functions are protected from annual appropriations but some Social Security Administration functions are funded by annual Congressional spending — with employees there facing furloughs this weekend as a result.
The next year’s cost-of-living adjustment is likely in any case to be less than half of the increase seniors enjoyed in 2023 due to cooling inflation.
Impacts at the Fed
Economists at the Fed are already preparing to feel the effects. While private data will continue, a slowdown in government data could give the central bank significantly less information as it mulls coming plans for interest rates.
Federal Reserve Chair Jerome Powell noted last week that the central bank is "awaiting further data" on the question of whether to raise rates before the end of the year. Later in that same press conference, responding to a question from Yahoo Finance's Jennifer Schonberger about a potential data shortage, he said "we would just have to deal with that."
He added that he wasn’t yet sure how it could impact the Fed’s next meeting, scheduled to begin on Oct. 31, with a decision on interest rates set to come down the following day.
Much will, of course, depend on the duration of any shutdown. A brief stoppage would likely allow data collection and economic releases to return online quickly. But an extended funding gap could impact not only the release of the key data but whether it’s collected at all, with thousands of government employees in limbo.
Some stoppage at least seems all but assured at this point with lawmakers at loggerheads and Goldman Sachs recently pegging the chances of a shutdown this weekend at 90%.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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