Following a 43-day federal shutdown—the longest in U.S. history—government operations have resumed, yet economic uncertainty persists. Critical data on employment, inflation, and consumer spending remain unreleased, and some reports may never be published. This absence leaves policymakers, businesses, and financial institutions making decisions without reliable benchmarks. n nThe White House confirmed that key economic indicators affected by the closure are unlikely to be issued, although September’s job figures, collected prior to the shutdown, are expected soon. Compounding the challenge, new tariffs on imported goods could elevate prices on items ranging from electronics to clothing during the crucial holiday season. n nEdward Van Wesep, professor and chair of the finance division at CU Boulder’s Leeds School of Business, discussed the implications of missing economic data for consumer behavior and market forecasting. n nTypically, federal agencies gather essential statistics by surveying households, businesses, and retailers. During a shutdown, these surveys halt, delaying official reports on labor and inflation. In their absence, analysts rely on alternative sources, such as private payroll estimates from firms like ADP, which track wages for roughly one-fifth of American workers. However, these proxies lack full coverage, particularly in public-sector employment, where disruptions are most acute. n nWhile individual shoppers may not feel immediate effects at grocery stores, the lack of accurate data impacts broader economic decision-making. The Federal Reserve, businesses, and investors depend on timely reports to set interest rates, plan hiring, and adjust production. Without current information, monetary policy may misalign with actual conditions, influencing major purchases like homes and vehicles. n nTariffs further complicate the outlook. Taxes on imported consumer goods typically shift costs between buyers and sellers based on market responsiveness. Foreign exporters of low-cost products have limited ability to absorb these taxes, meaning U.S. consumers often bear the brunt. Retailers like Walmart and their suppliers also face tight margins, reducing their capacity to cushion price hikes. n nHowever, the impact varies. High-value imports such as smartphones and semiconductors involve powerful global suppliers and domestic distributors who can absorb more of the cost, minimizing consumer impact. Still, without official price tracking, it’s difficult to assess real-time changes across markets. Private data helps, but only government reports offer a comprehensive view. n nLooking ahead to the holiday season, overall consumer spending tends to remain stable, even during downturns. During the Great Recession, for example, aggregate spending declined by less than 2.5%. However, this masks significant hardship among lower-income households, while higher earners sustain demand. Recent trends suggest the bottom 80% are under financial strain, while top earners are driving economic activity—a scenario that may hurt mass-market retailers. n nConsumers are increasingly turning to credit. Unlike the pandemic period, when savings rose and credit card debt fell, the current trend shows declining savings and rising debt. This shift raises concerns among businesses, as sustained spending beyond income levels is unsustainable in the long term. n nNow that federal agencies are restarting, the economy remains opaque. Even before the shutdown, volatility in trade and inventory levels created uncertainty. Missing data on labor markets, GDP components, and consumer behavior makes it harder to assess current conditions. Legal challenges, such as potential Supreme Court rulings on tariff policies, add another layer of unpredictability. n nAs data slowly returns, Van Wesep emphasized watching the first post-shutdown government employment report and comparing it with ADP’s estimates. He also highlighted the importance of dissecting GDP growth—particularly consumer spending, business investment, and sector-specific trends like data center construction. A strong headline number driven by narrow sectors may signal underlying fragility, whereas broad-based strength in labor and consumption would indicate healthier momentum.
— news from University of Colorado Boulder
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Government reopens but economic uncertainty lingers: What consumers should know
After a 43-day shutdown—the longest in U.S. history—the government is reopening, but the effects are far from over. Key economic reports on jobs, inflation and retail sales remain delayed, and in some cases may never be released, leaving policymakers and businesses to make decisions without a clear picture of the economy. n nThe White House said Wednesday it was unlikely that key federal inflation and labor reports affected by the shutdown would be released, although September’s employment data, collected before the shutdown, is expected to come out soon. The added uncertainty comes as new tariffs on imported goods could push up prices on everything from toys and electronics to clothing heading into the holidays. n nCU Boulder Today caught up with Edward Van Wesep, professor and chair of the finance division at the Leeds School of Business, to discuss what the loss of economic data means for consumer confidence and spending as the holiday season ramps up and how uncertainty could linger even as federal operations resume. n nLet’s start with the big picture: What is an “economic data blackout,” and what happens when it lifts? n nThe government normally collects key economic numbers—like jobs and prices—by surveying households, businesses and stores. A shutdown can pause these surveys, delaying official reports on employment and consumer prices. When we don’t have those numbers, either we’re in a complete blackout, or we try to use substitutes for the government data. n nOnline data can help, but it only covers part of the market. Private estimates, like ADP payroll reports—which track wages for about 20% of U.S. workers—fill some of the gaps, but without government data, these estimates can drift from reality, especially in sectors like government work that are heavily affected by a shutdown. n nWhy should everyday consumers care that these reports were delayed? n nIf you’re deciding what to buy at the grocery store, it might not matter much. But economic forecasters and regulators, like the Fed, rely on these numbers to make decisions. Businesses use them to plan investments, production and hiring. When numbers are missing, uncertainty rises. Without current data, interest rates may not reflect real economic conditions, which can affect big-ticket purchases like cars and homes. n nHow do tariffs factor into that uncertainty? n nTariffs on low-end consumer goods are likely raising prices. A tariff is a tax on imports and all taxes get split between buyers and sellers based on something called elasticities of demand and supply. These describe how much people and companies cut back when they face cost increases. Foreign exporters of low-end consumer goods have very little space to absorb a tax, so U.S. consumers end up paying more. Companies selling these goods here, like Walmart and its suppliers, also have very little room to absorb tariffs, so consumers are likely to bear the burden. n nIt’s not uniform, though. Powerful foreign exporters such as those making iPhones and semiconductors have space to absorb costs, as do U.S. sellers of these goods. Consumers probably won’t feel as much of a pinch for these goods. But the point is that we just don’t know how prices of any of these goods are changing because government statistical agencies aren’t releasing data. Proxies from private organizations help, but government data completes the picture. n nWith the government reopening, what does the broader picture look like for holiday spending? n nIt’s worth pointing out that aggregate consumer spending doesn’t ever fall dramatically, COVID-19 pandemic aside. Even in the great recession, spending dropped less than 2.5%. But small drops in aggregate mask large effects for people experiencing unemployment or financial stress, while most people go about their business. The labor market has been awful for over six months and in the first two quarters the economy was weak. We just don’t know how weak it has been since June. Those numbers haven’t been released. We have estimates, but they’re all over the place. It seems that the bottom 80% are suffering and the top earners are carrying the economy. That’s probably bad news for most retailers and companies serving the mass market. n nCould continued uncertainty make consumers rely more on credit? n nConsumers are already relying on credit. During the pandemic, personal savings spiked while credit card debt dropped. Now savings are lower and credit card debt is higher. People are already spending money that they don’t have, which worries firms because if most of your customers are spending money they don’t have, at some point, they will probably stop. n nNow that the shutdown is over, how should consumers and businesses think about the economy? n nThe economy right now is a mystery. It was a mystery even before the shutdown, given huge swings in imports and inventories surrounding the tariffs. Missing or delayed data makes it hard to know how labor markets, gross domestic product growth, and consumer spending are holding up now. Add in factors like tariffs, which may soon be (temporarily) banned by the Supreme Court, and it becomes even harder for businesses and consumers to gauge what’s really happening. n nAs the government starts coming back online, what’s the most important data to be watching? n nI’ll compare ADP’s labor numbers to the government’s first post-shutdown report. I’ll also watch GDP, but more importantly its components: consumer spending, firm investment, and growth from sectors like data centers. Even if the headline GDP number looks strong if consumer spending is solid but labor markets weak, that’s a recipe for slower growth ahead. If a lot of GDP comes from data center construction, that’s confidence in a very narrow industry holding up the economy. Broader-based labor market and consumer strength would be a healthier sign.