Hello and welcome to day three of 2025’s government shutdown!
I’d hoped we could spend today diving into the latest data headline data, but with offices closed all over D.C., there won’t be any data to speak of this week.
Yet despite a lack of hard data, the general direction of America’s economy remains pretty clear.
Click the video below for the full story:
Video transcript:
Good morning!
Welcome to Moneyball Economics. I’m Andrew Zatlin and today, Friday, I was hoping to talk payrolls.
I was hoping to talk the latest snapshot of the labor market, what the trends were that were being revealed, how the markets were reacting, and what we could expect going forward from the Fed.
Instead, I’m left with a nothingburger.
I’m left with the government shutdown, which has withheld both jobless claims yesterday, as well as what we’ve got today in the form of payrolls.
So let’s talk about what that means for the market because there is some choppiness that we can expect going forward. Big picture, we just started October. This is the start of the fourth quarter, and more critically, the start of earning season for the third quarter. This is traditionally a very important month. This is when we start to get some information from companies as to where they’ve been and where they expect to go, especially with respect to 2026, which is now less than three months away.
So this is a critical time of information gathering and we’re going to get that information from the companies. That’s going to be some really critical hard data.
But what we’re not going to be getting because of this government shutdown is the data that moves the Federal Reserve. I’m talking about this week, jobless claims. I’m talking about payrolls next week, inflation, two weeks from now retail.
I expect this government shut down to last about two weeks, which I’ll get to in a minute. And as a result, we’ve got a meeting of the Federal Reserve where they have no latest visibility into what’s going on in the economy.
The market has a narrative that says the economy’s weakening that is going to be put to the test this month, and yet it can’t be. So with all this data coming out that is not official government data, it’s going to be very interesting to see how the market responds, because I believe that the non-government data is going to show a positive pivot, and I want to talk about that.
I believe whatever decisions on the table, the market is going to start to get a little bit anxious as the days go by, and that would mean turbulence in the market.
That means every time we get a new economic data point, the market’s going to either swing up or down. So you want to think about playing that volatility by spy collars or something like that. For all you pros out there right now, we’ve got this sideshow called the government shutdown. What’s driving the government shutdown is basically a power play by the Democrats.
They don’t have the votes to accomplish anything during the year, but this time of the year, they absolutely have all the leverage, and that’s because this is when the budget has to be locked down and the Republicans don’t have enough votes to do that. As a result, all the strength is with the Democrats and so are the optics.
Where the fight is going on is over a trillion, trillion a half dollars of spending on healthcare, especially for, well, the Republicans call them illegal immigrants. The Democrats are playing footsie with nomenclature and calling them immigrants who are “undocumented, but have requested asylum.”
In essence, the Democrats are positioning themselves as the party of the poor and disenfranchised, people who depend on Medicaid, people who depend on welfare, people who depend on getting public access to affordable care.
This plays really well, really well, and optically, the Republicans look like Scrooge. They’re playing fiscal conservative. That doesn’t work very well. However, the way I see this playing out is both sides need to get a win, so both sides are going to go down to the wire. I think this goes out two weeks, and that’s a problem for all the data that the Fed needs to see.
In addition, you’ve got two weeks of finger pointing, and there is a little bit of an economic impact, even though everyone furloughed from the government will get a paycheck eventually.
Not everyone who’s a civilian who’s being furloughed does a lot of folks like janitors, like baristas, security, people who are hourly workers who are not covered by salaries or by full-time agreements. They’ve been sent home without a paycheck, and that’s a lot of money. It adds up. So the economy comes a little bit of a lurch and not having this economic data, it kind of makes some companies and some businesses and some financial services kind of stop a little bit.
So there is downstream effect. Don’t think of this as a net neutral type of move. Never mind what Trump is saying about other things that he can do, damage he can put on the Democrats. This is a sideshow, though. The real story right now, excuse me, is that the economy is weak and therefore entitled to more and deeper rate cuts. Anything that speaks against that is a problem for the market.
And quite frankly, as you know, I believe that we have hit the bottom and we are now starting to move back up when it comes to hiring and when it comes to the broader economy as a whole, I believe we’re going to start getting GDP data that looks really good.
A lot of that has to do with some of the fact that a lot of the negative stuff that goes into GDP, like big imports was pulled into the first half, so a lot of stockpiling as a result. The second half, it’s going to look a little bit leaner when it comes to imports, and that drives up the export story, the net export story, which then pushes up the GDP.
Same thing with inflation. I think it’s going to be mild again, because imports are lower and on and on and on. I think we’re going to start getting the steady drumbeat that things are mostly behind us and as a result, we need to start ramping up for growth. That is really bad for anyone who expects a lot of rate cuts, and that’s kind of what the market’s expecting.
So with that in mind, we don’t have hard data. What we do is we’re going to have a lot of soft survey data, whether it’s a survey of this or the latest, look at manufacturing surveys, service surveys, blah, blah, blah.
Conventional data is going to be skinny, and that means a lot of people are going to be wigged out in the market. I believe that next year is going to be a growth year, and I believe that not just because the economy’s going that way, but because Trump is going to do everything in his power to dial it up that way, and that makes all this data coming out that was backwards looking so critical to get insight into where we’re going from here as we get through the summer.
Everything that is now September and forward based reflects what companies are really thinking, and that’s why not having this data right now is such a problem. This lack of visibility will affect the markets, especially if it continues into deep next week. So be prepared for up and down swings. We’re in it to win it folks.
Zatlin out.
Andrew Zatlin
Editor, Moneyball Economics