Another week of unemployment data was missing Thursday because of the shutdown. It has already resulted in a lack of monthly employment data for September and will likely result in missing employment data for October, along with a lack of data on consumer prices for October.
Outside of company updates, Wall Street is relying more on economic updates from other private sources. Private payrolls rose more than expected in October, according to a report Wednesday from ADP, and the services sector expanded in October, according to the Institute for Supply Management. The data can vary widely, however.
Job cuts in the US surged 175 per cent in October from a year ago, according to a report released Thursday from outplacement firm Challenger, Gray & Christmas. The reasons include softer consumer and corporate spending, rising costs, and the adoption of artificial intelligence.
The absence of updates on the job market and inflation has left the Federal Reserve in the dark at the same time that employment was weakening and inflation heating up. That leaves the central bank in a tough spot. It has to decide whether cutting its benchmark interest rate to counter the economic impact from a weaker job market is worth the risk of worsening inflation.
Lower interest rates can help stimulate the economy by making loans less expensive, but they can also fuel inflation.
“We anticipate the Fed will continue to implement rate cuts to prevent any weakness in employment from accelerating,” said Seema Shah, chief global strategist at Principal Asset Management. “Much of the market’s optimism hinges on the assumption that policymakers will maintain some level of support.”
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The Fed has already cut its benchmark interest rate twice this year. It has signaled more caution as it tries to navigate the risks to the economy. Wall Street is forecasting a 69 per cent chance that the central bank cuts interest rates in December, according to CME FedWatch. That’s down from more than 90 per cent just prior to the most recent interest rate cut.
The US government shutdown is having a direct impact on airlines, as airports face critical staffing problems. The Federal Aviation Administration will reduce air traffic by 10 per cent starting Friday across 40 “high-volume” markets. American Airlines fell 2.1 per cent, Delta Air Lines fell 1.6 per cent and United Airlines fell 1.9 per cent.
European markets fell after a divided Bank of England kept its main interest rate unchanged. Asian markets closed higher.
Treasury yields moved lower in the bond market. The yield on the 10-year Treasury fell to 4.09 per cent from 4.16 per cent late on Wednesday. The yield on the two-year Treasury fell to 3.56 per cent from 3.63 per cent late on Wednesday.
AP
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