RPT-BREAKINGVIEWS-The US shutdown will last long after it’s over

By Gabriel Rubin

WASHINGTON, Nov 12 (Reuters Breakingviews) - The U.S. government shutdown isn’t over when it’s over. During a now 43-day-long congressional deadlock over spending legislation, thousands of federal workers were forced to go without pay as bills piled up, depressing consumer spending. Statisticians and economists, deemed “inessential” in the brutal parlance of funding skirmishes, have not been collecting vital data, leaving gaps in the record and skewing the next several months of calculations. From the Federal Reserve’s rate-setters to corporate decision-makers, everyone will be operating in the dark for a while.

Members of the House of Representatives are due to vote Wednesday on a deal struck between Republican senators and eight members of the opposition Democratic Party, under which the government would reopen with funding through January 30. Within days, around 1.4 million federal employees will receive a hefty backpay check and return to work – assuming they are not one of the professions, like air traffic controllers, that have been on the job throughout.

That will come after a pay freeze and broader economic uncertainty that are expected to knock $28 billion off fourth-quarter GDP, reducing the annualized rate of growth by up to 2 percentage points, per the Congressional Budget Office. That will partially reverse in the next quarter, as backpay and other delayed government expenditures surge into the economy, presumably boosting growth. Some $11 billion in lost activity likely cannot be recovered, though, CBO analysts reckon.

While growth figures are likely to look skewed for months, at least the data will get collected. The delayed September jobs report, completed before the shutdown, will be released, but there may never be an October 2025 jobs report—which would be the first missing month of data in over 70 years. Even if figures for that month are collected, they should be taken with a grain of salt: with less time to collect responses, the margin of error is likely to be larger than usual. Subsequent revisions should help, but at that point the data will be months old.

At his October press conference, Federal Reserve Chair Jerome Powell likened the statistical snarl to driving in the fog: “You slow down.” While the Fed will be in marginally better shape at its final meeting of the year next month, uncertainty from shutdown-related idiosyncrasies will make central bankers’ job of deciding on the path of rate cuts significantly harder. At least for now, the December meeting is a “live one”—Fed officials have been adamant in their public remarks that no predetermined course has been decided upon. Even after the moment to pick a direction has passed, though, policymakers will almost certainly still be unclear on where they stand.

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CONTEXT NEWS

The United States Senate voted on November 10 to end the still-ongoing shutdown of the federal government. A 43-day lapse in appropriations has left hundreds of thousands of government workers furloughed or working without pay.

Federal employees are set to receive backpay for their missed paychecks in the coming days.