TLDR
- The US government shutdown halts BLS, delaying the September jobs report.
- Markets expect a 25 bps Fed rate cut despite missing labor data.
- Gold hits $3,886 and Bitcoin nears $125K amid easing expectations.
- Analysts warn the Fed may pause cuts without updated employment data.
The Federal Reserve’s upcoming October policy meeting faces new uncertainty as the U.S. government shutdown halts vital economic data releases. With the Bureau of Labor Statistics closed, the Fed lacks updated jobs and wage figures. Policymakers must now decide on interest rates without key labor insights, heightening market anticipation and risk.
Government Shutdown Disrupts Key Economic Data
A partial U.S. government shutdown that began on October 1 has closed several non-essential federal services. The Bureau of Labor Statistics (BLS) is among the affected agencies, halting the release of the September employment report. This report was expected to provide vital information on job creation and wage growth before the Federal Reserve’s October policy meeting.
The absence of new data complicates the Federal Open Market Committee’s (FOMC) decision-making. The committee is set to meet on October 28–29 to decide the next interest rate move. Labor data typically serve as a core indicator of the economy’s strength, guiding monetary policy choices. Without it, policymakers must rely on older and incomplete information.
Markets Expect Rate Cut Despite Rising Uncertainty
Financial markets continue to expect a 25 basis-point rate cut at the upcoming FOMC meeting. According to the CME Group’s FedWatch Tool, traders assign a 96.2% probability to this outcome and only a 3.8% chance of no change. This strong expectation persists even as uncertainty grows due to the missing jobs data.
The optimism extends across asset classes. Bitcoin traded near $123,012 on October 5, just below its all-time high of $125,506. The S&P 500 and Dow Jones Industrial Average also closed at record levels, while gold reached $3,886 per ounce, rising about 48% year-to-date. Analysts link these gains to investor belief in continued monetary easing and inflation concerns.
Fed Weighs Decision Without Labor Market Clarity
The missing employment report leaves the Fed “essentially flying blind,” according to an economist at Beacon Policy Advisors. Policymakers now face the challenge of balancing inflation control with the need to support growth during a government shutdown. A pause in rate cuts remains possible if members prefer caution over further easing.
The shutdown’s economic effect adds complexity to the decision. With federal employees furloughed and some services halted, short-term growth could slow. However, the magnitude of that slowdown remains unclear. The Fed may consider these risks while assessing whether to proceed with the expected 25 basis-point cut.
Private Indicators Offer Limited Guidance
In the absence of official data, the Fed is monitoring private and regional indicators. Reports from Federal Reserve districts and private-sector surveys provide partial insights into inflation and growth trends. If these point to cooling prices and weaker demand, a modest rate cut could still proceed to maintain market stability.
However, if inflation or wage pressures appear stronger than expected, a temporary pause could occur. Such a move might surprise markets that are heavily positioned for continued easing. Investors have started hedging against that risk through put options on major stock indices and cryptocurrencies, while increasing exposure to gold and Treasury bonds.
The upcoming weeks may determine how long the shutdown lasts and whether delayed data can be released before the FOMC meeting. Until then, the Federal Reserve faces a complex policy decision amid incomplete information and heightened market anticipation.
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