Shutdown leaves Wall Street ‘flying blind’

McClatchy Washington BureauOctober 2, 2013 

— The partial shutdown of the federal government has brought to a near halt the flow of real-time statistical information about the economy needed by financial markets.

The sudden lack of reports is causing a data vacuum on Wall Street, where the people who trade billions of dollars a day in stocks, bonds and commodities such as crude oil rely in part on government-provided economic statistics to inform their decision making.

“We’re kind of flying blind here,” said Mark Zandi, the closely followed chief economist for forecaster Moody’s Analytics. “We have a few clues from the private-sector data, but essentially we don’t have a good sense of what’s going on.”

The website of the Bureau of Economic Analysis, the statistical arm of the Commerce Department and the office that puts out growth estimates, now has a blue screen and a warning notice. “Due to the lapse in government funding, www.bea.gov will be unavailable until further notice,” it reads. “This includes access to all data and the e-File system.”

More problematic is the Bureau of Labor Statistics, part of the Labor Department. Its website makes clear the BLS will not be putting out this Friday what arguably has become, since the Great Recession, the most important barometer of economic health for financial markets, the monthly jobs report.

“During the shutdown period BLS will not collect data, issue reports, or respond to public inquiries,” the BLS website warns. “Updates to the site will start again when the Federal government resumes operations.”

BLS Commissioner Erica Groshen said in a statement last week that White House budget officials do have the power to authorize a release of the jobs report. But only three people are working at BLS during the shutdown, making release unlikely.

A former head of the bureau, Keith Hall, argues that the Labor Department should have published early at least the unemployment rate for September, before the government partially shut down on Oct 1.

“They should actually know what the unemployment rate for September is and they could post that,” said Hall, now a senior researcher at George Mason University’s Mercatus Center in suburban Virginia.

The monthly jobs report actually comes from two separate surveys, with the unemployment rate derived from a statistical sample of about 60,000 households reporting on whether family members are working or not. The data from that survey already would have abeen in and crunched, said Hall, who ran the agency from 2008 to 2012.

Monthly numbers on hiring by employers comes from a much larger survey of business establishments, and that data, too, would have been in and added up. But it undergoes some last-minute statistical tinkering. That the data is in hand but not public poses another problem.

“It means there is now a security risk, because the unemployment rate and maybe the payroll jobs numbers are close to being known,” said Hall, noting that government statistical agencies have ironclad rules that limit how long there’s any advance knowledge of market-moving data before it’s made public.

“Now you have this data that is sort of hanging out there,” he said. “Probably more than any other number out there, the unemployment rate and employment numbers move financial markets. So the timeliness of this is important.”

McClatchy reached out to the BLS before the shutdown about these issues and was sent to Labor Department spokesman Stephen G. Barr. He did not return emails or phone calls before or after the shutdown.

The Labor Department, through its Employment and Training Administration, is expected to publish Thursday the weekly numbers on first-time claims for unemployment insurance. This data is collected on a state level and was already compiled before the shutdown.

If a government shutdown is protracted, it also could affect Labor Department collection of data used to determine the rate of inflation, another important measure watched closely by financial analysts and corporations alike as it affects decisions on borrowing and investing. Agriculture Department crop statistics, important to growers and commodity traders in setting prices, would be affected if the shutdown goes beyond Oct. 11.

Absent a monthly jobs report this Friday, financial markets will have to make do with the monthly read of private-sector payrolls that comes from the ADP National Employment Report. That privately produced estimate of monthly hiring is a useful reference but has often varied widely with the broader and official government report on non-farm payrolls.

The ADP report, released Wednesday, estimated there were 166,000 new hires in September.

“Over the course of 2013, ADP has been undercounting the BLS measure of private employment by 17,000; doing the math this implies 183,00 on payrolls (assuming it ever gets released),” Neil Dutta, research chief for Renaissance Macro Research in New York, quipped in a note to investors on Wednesday.

Email: khall@mcclatchydc.com; Twitter: @KevinGHall

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