Core Viewpoint - The U.S. government shutdown is causing delays in the release of key economic reports, including inflation, employment, and unemployment data, which could impact the Federal Reserve's decision-making regarding interest rates [2][3][4]. Economic Reports Impact - The absence of these reports comes at a sensitive time for Wall Street and the Federal Reserve, as the labor market has deteriorated since late spring, prompting the Fed to implement its first rate cut of the year [3][4]. - The release of the September employment report, originally scheduled for Friday, is uncertain, with economists predicting an addition of 50,000 jobs [4][6]. - If the shutdown continues, the October employment report and Consumer Price Index (CPI) could face significant delays, with the CPI originally set for release on October 15 [4][8]. Historical Context - Historical data from the 2013 government shutdown indicates that delayed reports can be released shortly after government operations resume, but prolonged shutdowns could complicate data collection [5][9]. - If the shutdown lasts beyond 16 days, the October employment report and CPI will be severely affected, with potential delays pushing the employment report past November 7 [6][7]. Economic Implications - A prolonged shutdown could prevent the release of the October CPI, Producer Price Index (PPI), and Personal Consumption Expenditures (PCE), hindering the Fed's ability to assess current inflation trends [9]. - Despite the disruption in data release, historical experience suggests that government shutdowns do not significantly impact the economy itself, although extended shutdowns could increase the risk of economic fractures and misjudgments by the Fed [9][10].

Core Points - The U.S. federal government has shut down for the first time in nearly seven years, affecting approximately 750,000 federal employees who will be forced to take unpaid leave [1][5] - The shutdown is expected to delay the release of significant economic data, including the September non-farm payroll report and the Consumer Price Index (CPI), complicating decision-making for the Federal Reserve [1][11][13] - The economic impact of the shutdown is projected to be around $7 billion in GDP loss per week, with potential long-term effects on investor and consumer confidence [1][16] Federal Employee Impact - Approximately 750,000 federal employees will be on unpaid leave, costing about $400 million in daily wages [1] - Essential services will continue to operate, but non-essential government projects, such as national parks, may face closures [1][5] - The financial strain on federal employees could lead to severe economic difficulties, as seen during the previous shutdown from 2018 to 2019 [5][11] Political Dynamics - The shutdown reflects ongoing political battles between the two parties, primarily centered around healthcare funding and the Affordable Care Act [9][10] - Both parties are using the shutdown as leverage to force concessions from each other, with Democrats seeking to restore nearly $1 trillion in Medicaid funding [9][10] - The political landscape has shifted, with both parties believing that a shutdown may be more beneficial to their interests compared to previous instances [9][10] Economic Data Release - The Labor Department has indicated that all operations will pause during the shutdown, leading to the postponement of various economic reports [11][12] - Key reports, including the September non-farm payroll and CPI, are scheduled for release but may be delayed due to the shutdown [12][13] Market Reactions - Historical data suggests that the stock market may experience short-term pressure during the shutdown, but typically rebounds in the months following the reopening [18] - U.S. Treasury yields are expected to rise during the shutdown, as investor concerns about fiscal stability increase [20] - Gold prices tend to increase with the duration of the shutdown, reflecting heightened uncertainty in the market [23]

Core Insights - The potential government shutdown in the U.S. poses "invisible risks" to economic growth, key economic data, and specific financial instruments, although it does not present a systemic risk of default as seen in 2013 [1][2][8] Economic Impact - A comprehensive government shutdown could lead to 800,000 federal employees being furloughed, resulting in a weekly reduction of approximately 0.2 percentage points in annualized real GDP growth [1][5] - The previous shutdown in 2013 resulted in a $8 billion decline in annualized federal consumption expenditure, which ultimately reduced the fourth-quarter GDP growth by 30 basis points (0.3%) [5] - Even without a shutdown, federal government spending has already been a drag on GDP growth, contributing to an average reduction of about 40 basis points for the first half of 2025 [7] Data Release Delays - The shutdown would delay the release of critical economic data such as employment reports and the Consumer Price Index (CPI), as employees from the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) may be furloughed [3][4] - Historical data from the 2013 shutdown indicates that the release of employment and CPI data was significantly delayed, leading to a chaotic data release schedule [3][4] Financial Instruments Impact - The delay in CPI data will have specific implications for financial instruments such as Treasury Inflation-Protected Securities (TIPS) and inflation swaps, affecting their valuation and cash flows [9][11] - TIPS payments will be calculated using a backup index based on the most recent annualized inflation rate if the September CPI report is not released on time [11] - Inflation swaps will follow a different protocol, using actual data if released within five business days of the payment date; otherwise, a backup calculation will be employed [11]

Core Viewpoint - The U.S. federal government is facing a shutdown crisis as funding is set to run out on September 30, which could lead to the suspension of operations for several government agencies and unpaid leave for hundreds of thousands of federal employees [1][2]. Group 1: Government Shutdown Implications - If the government shuts down, the release of key economic reports, including the September employment report scheduled for October 3 and the inflation report on October 15, may be delayed, impacting the Federal Reserve's policy decisions [1][2][3]. - The Bureau of Labor Statistics (BLS) plans to halt all data collection and scheduled releases during a shutdown, which could lead to a decline in data quality and affect future economic estimates [3][4]. Group 2: Political Dynamics - The Senate recently rejected a temporary funding bill passed by the House, increasing the risk of a government shutdown due to a lack of bipartisan agreement on funding priorities, particularly regarding healthcare [2][5]. - A meeting between President Trump and congressional leaders is scheduled to discuss the impending shutdown, marking the first direct engagement between Trump and Democratic leaders on this issue [5][6]. Group 3: Historical Context - The U.S. government has experienced shutdowns over 20 times in history, with the longest occurring from late 2018 to early 2019, which resulted in significant economic losses estimated at $11 billion [6]. - The previous shutdown led to a 0.1% loss in GDP for Q4 2018 and a potential 0.2% loss for Q1 2019, highlighting the economic ramifications of government shutdowns [6].