How’s the U.S. econ­omy do­ing?

Shut­down makes it harder to say

The Morning Journal (Lorain, OH) - - FRONT PAGE - By Christo­pher Ru­gaber

The par­tial shut­down of the U.S. gov­ern­ment has be­gun to make it harder to as­sess the health of the econ­omy.

WASH­ING­TON >> The par­tial shut­down of the U.S. gov­ern­ment has be­gun to make it harder to as­sess the health of the econ­omy by de­lay­ing or dis­tort­ing key re­ports on growth, spend­ing and hir­ing.

Gov­ern­ment data on home con­struc­tion and re­tail sales, for ex­am­ple, won’t be re­leased next week be­cause staffers who com­pile those re­ports have been fur­loughed. The re­tail sales re­port pro­vides a snap­shot of con­sumer spend­ing, which fuels more than two-thirds of the econ­omy. With Macy’s and Kohl’s hav­ing said Thurs­day that their hol­i­day sales were weaker than ex­pected, a broader gauge of re­tail spend­ing would have pro­vided im­por­tant clar­ity.

In ad­di­tion, the next re­port on the econ­omy’s over­all growth, set for Jan. 30, won’t be re­leased if the shut­down re­mains in ef­fect. Even if the gov­ern­ment has fully re­opened by then, fed­eral work­ers won’t likely have had enough time to pro­duce the sched­uled re­port on the na­tion’s gross do­mes­tic prod­uct.

Not all agen­cies are closed. Con­gress ap­proved fund­ing last year for the La­bor De­part­ment, so the gov­ern­ment’s next monthly jobs re­port will be re­leased as sched­uled on Feb. 1. But it’s un­clear how long the de­part­ment will be able to is­sue jobs re­ports — the most closely watched barom­e­ter of the econ­omy — af­ter that.

Though the econ­omy re­mains

healthy in most re­spects, there are ris­ing con­cerns that growth could slow or even stall in com­ing months. The trade war be­tween the United States and China, which has helped de­press global growth, is likely slow­ing busi­ness in­vest­ment. The stim­u­lus from the Trump ad­min­is­tra­tion’s tax cuts is ex­pected to fade.

And bor­row­ing costs have risen since the Fed­eral Re­serve raised short­term in­ter­est rates four times last year. Be­fore re­bound­ing this week, stock mar­kets had plum­meted roughly 16 per­cent from their peak Oct. 2.

Many econ­o­mists in­creas­ingly see the shut­down, should it per­sist, as a drag on the econ­omy. Michael Feroli of J.P. Mor­gan has down­graded his fore­cast for growth in the first three months of 2019 be­cause

of the shut­down. He now ex­pects the econ­omy to grow at a 2 per­cent an­nual rate, down from his pre­vi­ous es­ti­mate of 2.25 per­cent.

The shut­down is cost­ing the econ­omy about $1.2 bil­lion a week, ac­cord­ing to Stan­dard & Poor’s. Some of that loss will be re­gained af­ter fed­eral work­ers even­tu­ally re­ceive back pay for the time they missed. But many gov­ern­ment con­trac­tors won’t be made whole. And lost busi­ness — such as sched­uled ho­tel stays from trips to na­tional parks that won’t be taken — may not be made up.

Fed of­fi­cials are now stress­ing their flex­i­bil­ity on rate hikes, em­pha­siz­ing that they will be pa­tient and their pol­icy “data de­pen­dent.” By this, the Fed means that the gov­ern­ment’s lat­est read­ings on hir­ing, in­fla­tion and growth will fac­tor heav­ily in its rate de­ci­sions. Yet much of that data will now be un­avail­able — to the Fed or any­one else.

“For us, one of the big­gest ef­fects of the shut­down has been around data,” Raphael Bos­tic, pres­i­dent of the Fed’s At­lanta re­gional bank, said Wed­nes­day. “We’re wor­ry­ing about that.”

Even some re­ports that are re­leased on sched­ule are likely to be dis­torted by the shut­down. For ex­am­ple, the Jan­uary jobs re­port may show an ar­ti­fi­cially high un­em­ploy­ment rate and low em­ploy­ment fig­ure. That’s be­cause up to 380,000 fed­eral em­ploy­ees who aren’t work­ing or be­ing paid dur­ing the shut­down — but who will re­turn to work after­ward — could be counted as un­em­ployed for Jan­uary.

If so, that would raise the un­em­ploy­ment rate by 0.2 per­cent­age point, es­ti­mated Ben Her­zon, an economist at Macroe­co­nomic Ad­vis­ers, a fore­cast­ing firm. And the monthly job count could de­cline by 380,000 if the shut­down con­tin­ues through the end of Jan­uary, Her­zon said. That could push the monthly job fig­ure into neg­a­tive ter­ri­tory.

If all the fed­eral work­ers even­tu­ally re­ceive back pay, as oc­curred af­ter pre­vi­ous shut­downs, then the Jan­uary jobs re­port would later be re­vised to re­store those 380,000 jobs, ac­cord­ing to the La­bor De­part­ment’s Bureau of La­bor Sta­tis­tics.

Fu­ture jobs re­ports could be jeop­ar­dized, too, if the gov­ern­ment re­mains shut down. The Cen­sus Bureau con­ducts the monthly sur­veys that the BLS uses to cal­cu­late the un­em­ploy­ment rate. Cen­sus is part of the Com­merce De­part­ment, which re­mains closed dur­ing the shut­down.

The BLS wouldn’t say whether data col­lec­tion will con­tinue be­yond Jan­uary if the shut­down con­tin­ues.

A busi­ness jour­nal­ists’ or­ga­ni­za­tion on Fri­day urged “all par­ties” to end the shut­down, say­ing it is “deeply trou­bled” by de­lays in re­lease of the eco­nomic re­ports.

“Timely ac­cess to data about the United States econ­omy is crit­i­cal to de­ci­sion-mak­ing by our na­tion’s busi­nesses and con­sumers,” the So­ci­ety for Ad­vanc­ing Busi­ness Edit­ing and Writ­ing said in a state­ment. “The con­tin­ued par­tial shut­down is dis­rupt­ing the vi­tal flow of in­for­ma­tion.”

Some eco­nomic re­ports have al­ready been missed. They in­clude a monthly re­port on fac­tory or­ders that was sched­uled for Mon­day. That re­port typ­i­cally pro­vides in­sights into how much U.S. com­pa­nies are spend­ing on large equip­ment. In­fla­tion data will also be af­fected: The con­sumer price in­dex was re­leased Fri­day morn­ing as sched­uled, be­cause it was pre­pared by the La­bor De­part­ment. But the Fed’s pre­ferred in­fla­tion gauge is pub­lished by Com­merce’s Bureau of Eco­nomic Anal­y­sis, which is closed.

And be­cause the Agri­cul­ture De­part­ment is closed, fu­ture re­ports on whole­sale prices and im­port prices won’t in­clude farm-re­lated data, the BLS said Thurs­day.

A re­port on the num­ber of peo­ple seek­ing un­em­ploy­ment ben­e­fits, con­sid­ered a nearly real-time re­flec­tion of lay­offs, is still be­ing pub­lished. But it could be dis­torted by the shut­down: Nearly 5,000 fed­eral em­ploy­ees sought ben­e­fits two weeks ago, ac­cord­ing to the lat­est data avail­able, roughly five times the usual fig­ure.

And only a por­tion of the gov­ern­ment’s re­port on pro­duc­tiv­ity, or out­put per hour worked, will be re­leased Feb. 6, the La­bor De­part­ment said. That’s be­cause that re­port re­quires data on the growth of GDP, the broad­est mea­sure of the econ­omy.

Even af­ter the gov­ern­ment fully re­opens, weeks will likely be needed be­fore all the post­poned re­ports can be pre­pared and re­leased.

“It may take some time to get a ‘clean’ read on the econ­omy,” econ­o­mists at Bank of Amer­ica Mer­rill Lynch said Thurs­day.


Gov­ern­ment work­ers, Amer­i­can Fed­er­a­tion of Gov­ern­ment Em­ploy­ees union mem­bers and mem­bers of sup­port­ing lo­cal unions, pose for a group photo dur­ing the rally to high­light the ef­fect the fed­eral shut­down, Thurs­day in Min­neapo­lis.

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