Into the unknown

The US federal government entered a shutdown last week after lawmakers failed to reach an agreement over 2026 funding. While markets generally appeared unfazed, reflecting a growing tolerance for political drama, the shutdown has disrupted key government operations. Among them was the Bureau of Labor Statistics (BLS), which had to postpone key economic data releases. The most prominent was the September jobs report.

Investors turned to alternative sources to fill the gap. But those were not terribly helpful, as their signals crossed. ADP, a payroll processor, reported that September private employment declined by 32,000, while Revelio Labs, a third-party employment data provider, reported a gain of 60,000. These conflicting figures complicate the narrative of a clearly slowing labor market previously suggested by BLS report, adding to existing uncertainty about the direction of the economy.

Other data released last week included underwhelming readings of the health of the manufacturing and services industries. The ISM manufacturing index was in line with expectations and still within contraction territory. Positively, employment readings increased, and prices paid decreased, while new orders declined. However, the ISM services index fell below expectations, edging closer to contraction territory itself.   

The state of the consumer also dipped as evidenced by the Conference Board’s Consumer Confidence Index falling to 94 from 98 last month. For context, while down from the 100-level at the start of the year, it remains above the April low of 86. Inflation expectations slipped a tick, and sentiment around business conditions and the availability of jobs deteriorated.