How a Government Shutdown Disrupts the Economic Data Investors Rely On

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What this video's about

In this edition of The Market Share, Paul Gifford, Chief Investment Officer at 1st Source Bank, speaks with Erik Clapsaddle, Director of Fixed Income Research. They explore how the federal government shutdown is interrupting access to critical economic data and what that means for markets, investors, and decision-making.

Even without full government reporting, signals are emerging from corporate earnings, private data sources, and real-time GDP models. Paul and Erik walk through what's still available, what to watch next, and how to stay focused when data gaps widen.

What a shutdown means for economic data

When the government shuts down, many of the most relied-on indicators stop flowing. Agencies like the Bureau of Labor Statistics, the Census Bureau, and the Bureau of Economic Analysis halt their reports. That includes the CPI, PPI, jobs numbers, retail sales, housing starts, and more.

"You're flying without your dashboard," Erik says. While some private sector data and Federal Reserve reports continue, the broader picture becomes harder to interpret.

But there are other data sources still available:

• ADP payroll reports, though less consistent than BLS figures
• ISM manufacturing and services indexes, which offer a look at inflation and employment trends
• Select Fed reports, including consumer credit and industrial production

In a fast-changing economy, losing access to these benchmarks can make it harder to time decisions, interpret trends, or adjust forecasts.

Labor market cooling but still resilient

Before the shutdown, labor market data showed early signs of softening. That shift is part of why the Fed has cut interest rates recently. Employment conditions remain generally healthy but the pace is changing.

Key labor trends:

• For the first time in recent memory, the number of unemployed workers now exceeds job openings
• The underemployment rate (also known as U6), which includes discouraged and part-time workers, has risen from a low of 6.6% to 8.1%
• The Fed's inflation response is increasingly tied to this labor slowdown, rather than a rapid fall in prices

While these shifts are normal in a long-term context, they mark a pivot point in the current cycle. The message is: expect a cooler labor market going forward, not a collapse.

Inflation trends and the 3.8% GDP wildcard

The Fed's preferred inflation gauge is currently at 2.9%, just shy of its 2% target. Across major indicators, inflation is holding in the 2.5% to 3% range, lower than a year ago but not enough to ease pressure on rates.

Despite that, third-quarter GDP may surprise to the upside. The Atlanta Fed's real-time GDPNow model forecasts 3.8% growth for Q3. That's a strong number by any measure, especially in a slowing rate environment.

If that forecast holds it suggests continued resilience in consumer spending, production, and service activity despite the drag of higher rates and tighter credit.

What earnings are revealing beneath the surface

With official data limited, market attention is shifting to corporate earnings. These reports offer a more granular look at how companies and consumers are navigating the environment.

Early highlights:

• Tesla reported all-time highs in both vehicle deliveries (497,000) and energy storage deployments (12.5 GWh), likely helped by the expiration of the $7,500 EV tax credit
• Constellation Brands beat earnings expectations, even as consumer demand for alcohol softens
• Fifth Third's acquisition of Comerica pushes it into the top 10 U.S. banks, a sign of ongoing consolidation in the financial sector

Expectations are mixed going into earnings season, but these early results show that strong performance is still possible, even in pockets of pressure.

Bigger forces on the horizon

Erik notes that we're in a global transition period. Monetary policy, fiscal spending, and technological disruption are all intersecting at once.

• Geopolitical shifts are reshaping trade, supply chains, and investor sentiment
• Fiscal changes-including in the U.S., Europe, and Asia-are altering stimulus, taxes, and infrastructure priorities
• Artificial intelligence continues to evolve rapidly, with implications for labor productivity, capital investment, and industry structure

Even with limited data, these forces are impossible to ignore. Investors must balance what's missing with what's emerging.

Conclusion

When the usual signals go silent, you need to know where to look next. From earnings reports to labor indicators, Paul and Erik offer a grounded view of what's happening now and what could come next.

Economic conditions are changing fast. Stay current with The Market Share for trusted insights that keep you informed, prepared, and ready to act.

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