Following the government shutdown, the Federal Reserve will be flying more blind than usual without key data. This could lead to a mistake in setting interest rates, cutting too much if the job market strong, too little if it's weaker than thought. But there are clues to watch on the state of the economy.One of them is the ADP's private payroll report. It came in surprisingly weak. Last month, the private sector shed 32,000 jobs, marking the biggest decrease since 2023.JP Morgan Mike Feroli says the continu ...

Labor Market Analysis - Government payroll data remains vital for understanding the jobs market and the economy, despite ADP's volatility [1] - ADP data aligns well with the Bureau of Labor Statistics private sector data over a year, with a year-to-date difference of only 9,000 jobs per month in August [2] - Alternative data may not accurately reflect changes if jobs are at an inflection point [3] - Jobless claims provide data on firings, but not hiring [3] Key Indicators - Continuing claims plus the Conference Board's employment data on jobs hard to get serve as a good proxy for the unemployment rate [4] - Hiring intentions in the small business NFIB survey are considered the best single indicator of payrolls for the month ahead, showing signs of stability after weakening earlier in the summer [5] Government Sector Impact - Trump administration layoffs of federal workers are expected to impact job data this month and next, with no private sector data replacement [6] - ADP reported a decrease of 32,000 jobs for September, partly due to revisions [6] - Revisions suggest a softer job market than previously believed [6]

Economic Impact of Government Shutdown - Each week of a government shutdown shaves off approximately 025 percentage points from the annualized GDP growth rate during that quarter [4] - A three-week shutdown, the longest seen, could potentially be absorbed within the fourth quarter, resulting in a negligible overall impact [5][6] - A prolonged shutdown could lead to a 1 percentage point reduction in fourth-quarter GDP growth [4] Labor Market Data and Analysis - A government shutdown would suspend data releases from the US Bureau of Labor Statistics (BLS) and cease active data collection [1] - The absence of federal data increases the importance of alternative datasets like ADP data for labor market insights [2] - The Department of Labor could reduce its workforce from approximately 13000 to 3000 employees during a shutdown, with only one employee remaining at the Bureau of Labor Statistics [10] - Data collection during the reference week (containing the 12th of the month) could be significantly impacted, potentially leading to choppy labor surveys and data revisions [11][13] - Mass firings could increase the unemployment rate up to 45% [11] Federal Reserve Policy Implications - A government shutdown could hinder the Federal Reserve's ability to make informed decisions due to the lack of official statistics [7] - The Fed relies on data like the core PCE measure and the unemployment rate for communication and policy decisions, which would be unavailable during a shutdown [8]

Economic Impact of Government Shutdown - A government shutdown typically reduces GDP growth by approximately 0.25 percentage points per week, potentially leading to a full percentage point reduction in fourth quarter growth if the shutdown lasts four weeks [4] - A three-week shutdown, while significant, may not have a lasting impact on the overall economic performance of the fourth quarter, as there may be opportunities to recover losses once operations resume [5][6] Data Collection and Labor Market Insights - The U.S. Bureau of Labor Statistics (BLS) will suspend all operations and data collection during a government shutdown, which will limit the availability of key economic data [1][10] - In the absence of federal data, alternative datasets, such as ADP data, will become increasingly important for understanding labor market conditions [2][3] - A potential reduction in the number of employees at the Department of Labor during a shutdown could lead to significant disruptions in data collection, particularly affecting labor surveys for October [11][13] Federal Reserve and Economic Decision-Making - The Federal Reserve may face challenges in making informed decisions due to the lack of official statistics during a government shutdown, which complicates their communication and policy formulation [7][8] - The absence of preferred inflation measures and unemployment statistics could hinder the Fed's ability to assess the balance of labor supply and demand [8]

Economic Indicators & Trends - The national unemployment rate is at 43%, while the unemployment rate for young Americans ages 16 to 24 is 105% [1][9] - US import tariff rate is at 195% according to the Organization for Economic Cooperation and Development [1] - The economy grew at almost 4% in the second quarter, according to the Commerce Department [1] - Small business confidence is increasing, potentially due to the resolution of tax policies [1][4] Inflation & Cost of Living - Ground coffee prices have increased by 33%, from $631 to $887 per pound [1] - Auto insurance costs are up 60%, shelter costs are up 50%, and electricity costs are up 38% over the past 5 years [10] Consumer Behavior & Savings - 46% of US adults have enough emergency savings to cover three months of expenses, while 24% have no emergency savings at all [20] - There's increased use of "buy now pay later" programs, which can be risky due to high interest rates after missed payments [14][15] Stock Market & Investment - The stock market is booming, hitting 28 highs this year, boosted by AI promises [1] - There's a lot of AI investment and energy in tech, with a few big tech stocks driving the S&P 500's performance [24] - A record amount of money is in money market funds, offering around 4% interest, indicating people are seeking safer investments [30][31] Trade & Tariffs - Tariffs have sharply raised prices for things like coffee, bananas, TVs, and toys [1] - The president's tariffs against China have caused China to not buy any US soybeans [38] Political & Economic Perceptions - People who blamed Biden for the high cost of living don't blame Trump for the same high cost of living [41] - There's a pervasive feeling that the current economic system is not working for many Americans [51]

Core Viewpoint - A bipartisan group of former top US economic officials has filed a brief to the Supreme Court in support of Federal Reserve Governor Lisa Cook, emphasizing the importance of protecting Federal Reserve independence for the global economy [1][2][3] Group 1: Importance of Federal Reserve Independence - The document highlights the historical consequences of compromising central bank independence, which often leads to higher inflation and interest rates due to political interference [5][6] - Examples from history, such as the collaboration between Nixon and Arthur Burns, are cited to illustrate the detrimental effects of undermining Fed independence, resulting in double-digit inflation [6] Group 2: Current Economic Indicators - Recent economic data indicates cracks in the labor market, with payroll growth averaging under 30,000 per month, which is below break-even levels [13] - The unemployment rate is slowly nudging up to 4.3%, with the black unemployment rate increasing from 6% in May to 7.5% [14] Group 3: Rate Cut Considerations - There is a belief that an October rate cut is likely due to the weakening labor market, although caution is advised regarding a potential December cut due to persistent inflation and stronger-than-expected consumer spending [15]

Economic Outlook & Investment Strategy - KKR认为美国正在经历类似于1990年代的生产力繁荣，这能够支持更高的工资、承受关税对利润率的影响，并最终推动收入增长 [8][9] - KKR的基本观点是，美国经济将继续以1.5%到2%的速度增长，并且可能略有上升 [14] - KKR预计美联储今年将降息两次，明年将降息三次，以支持市场 [15][28] - KKR认为企业正在继续增加资本支出，消费者状况良好，因此当前市场水平相对安全 [16] Sector & Regional Analysis - AI资本支出增长超过了个人消费的所有增长，这是一个巨大的变化 [3] - 亚洲市场（尤其是韩国和日本）存在投资机会，这些市场的估值较低，且企业正在进行改革 [17][18][19] - 亚洲内部贸易正在增长，预计将从目前的48%-50%增长到70%，类似于欧洲和美洲的水平，这将推动物流基础设施的发展 [22][23] Risks & Concerns - 如果AI领域的回报率下降过快，可能会对GDP产生影响 [26] - 如果失业率大幅上升至5.5%，将对经济体系造成冲击 [26] - 低收入消费者正在感受到更高通胀的影响，一些杠杆实体因利率上升而面临压力 [15] Labor Market Dynamics - 政府部门就业岗位的减少和医疗保健及教育行业的窄幅关注可能会导致政府数据表现不佳 [10] - KKR观察到企业招聘速度放缓，但没有出现大规模裁员 [11] - 如果不是因为特朗普政府限制了劳动力供应，失业率可能会接近5% [12]

In the labor market, there has been a marked slowdown in both the supply of and the demand for workers, an unusual and challenging development. In this less dynamic and somewhat softer labor market, the downside risks to employment have risen. The unemployment rate edged up to 4.3% in August, but has remained relatively stable at a low level over the past year.Payroll job gains slowed sharply over summer months as employers added an average of just 29,000 per month over the past three months. The recent pac ...

Economic Conditions - The unemployment rate remains low but has edged up, with job gains slowing and downside risks to employment rising [1] - Inflation has risen recently and remains somewhat elevated [1] - Recent indicators suggest that growth of economic activity has moderated [3] - GDP growth rose at a pace of around 1% to 1.5% in the first half of the year, down from 2.5% last year [3] - The moderation in growth largely reflects a slowdown in consumer spending [3] - Business investment in equipment and intangibles has picked up from last year's pace [4] - Activity in the housing sector remains weak [4] Monetary Policy - The Federal Open Market Committee decided to lower the policy interest rate by a quarter percentage point (0.25%) [2] - The Committee also decided to continue to reduce its securities holdings [2] Economic Projections - The median participant projects GDP to rise 1.6% this year and 1.8% next year [4]

While the unemployment rate remains low, it has edged up. Job gains have slowed and downside risks to employment have risen. At the same time, inflation has risen recently and remains somewhat elevated.In support of our goals and in light of the shift in the balance of risks, today the Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. We also decided to continue to reduce our securities holdings. ...