White House official says October jobs and inflation data are likely to never be released

The recent 43-day government shutdown, now concluded, has reportedly led to the permanent loss of critical October CPI and jobs data, potentially impairing the Federal Reserve's ability to make informed policy decisions. Despite this significant data gap, a Reuters poll indicates 80% of economists still anticipate a 25-basis-point rate cut by the Fed on December 10, citing a perceived cooling labor market. However, some analysts, such as Apollo Global Management's chief economist, warn that persistent inflation above the Fed's target could complicate such a move, highlighting divided opinions on the Fed's near-term trajectory.

Analysis

The recent 43-day government shutdown has concluded, but critical October CPI and jobs data may be permanently lost, marking an unprecedented gap in economic indicators since tracking began. This data impairment, as highlighted by the White House, poses a significant challenge for the Federal Reserve, potentially forcing policymakers to operate without complete information ahead of their December rate decision.

Despite this data vacuum, a Reuters poll of 105 economists indicates an 80% consensus for a 25-basis-point rate cut on December 10, anticipating a cooling labor market and moderating inflation, consistent with Fed Chair Powell's October statements. UBS economist Abigail Watt supports this view, suggesting the FOMC will likely deliver the cut due to perceived labor market weakness.

Conversely, Apollo Global Management's chief economist, Torsten Sløk, points to persistent inflationary pressures, noting that 55% of CPI items are rising above the Fed's 2% target. This divergence underscores significant uncertainty regarding the Fed's path, as sustained inflation could complicate or deter an anticipated rate reduction.

Key Decisions for Investors

• Investors should closely monitor the Federal Reserve's December meeting for any explicit acknowledgment of the data gap and its influence on policy decisions.
• Evaluate portfolio positioning in interest-rate sensitive assets, considering the strong economist consensus for a rate cut against the backdrop of persistent inflation concerns.
• Prepare for potential market volatility if the Fed's decision deviates from the widely anticipated 25-basis-point reduction, given the conflicting economic signals.