US Government Shutdown Looms: NFP and CPI Data at Risk

The probability of a US federal government partial shutdown continues to rise as Fridays funding deadline approaches, with specific consequences for financial markets that differ from previous episodes. The core dispute centers on funding for the Department of Homeland Security, but the collateral damage could jeopardize the release of top-tier economic data.

The “Data Blackout” Risk

Unlike previous shutdowns where essential economic bureaus remained funded, the current impasse involves the Department of Labor. If a deal is not reached, the funding lapse could force the suspension of the Bureau of Labor Statistics (BLS).

• At Risk: The release of the Non-Farm Payrolls (NFP) and Consumer Price Index (CPI) could be delayed or cancelled.
• Safe: The Department of Commerce is funded, meaning GDP and PCE (the Fed's preferred inflation gauge) should theoretically continue.

However, analysts warn that even the “safe” data is vulnerable; the PCE calculation relies heavily on CPI inputs. A suspension of data collection would force the Federal Reserve to make pivotal policy decisions without a complete dashboard of labor and inflation metrics.

Market Impact

“Data interruption disrupts not only the market but also hinders economists and policy makers,” noted Stephen Juneau, a senior economist at Bank of America. With the Fed attempting to navigate a soft landing, a blind spot in labor data could lead to increased volatility and erratic repricing in the bond markets.