A post-shutdown fog will hang over the U.S. economy for months

The longest government shutdown in U.S. history concluded last night, after Congress passed a bill, which was quickly signed into law, to restore government functions and resume normal activity. But one key impact will continue to be felt for months to come.

Throughout the 43-day shutdown, key economic data was not gathered and the release of crucial economic indicators was delayed. 

In fact, the White House now says jobs and inflation data for October may never be released because of the shutdown.

“All of that economic data released will be permanently impaired, leaving our policymakers at the Fed, flying blind at a critical period,” said White House press secretary Karoline Leavitt, referring to the Federal Reserve, the U.S. central bank.

That lack of data has already cast a fog of uncertainty over the state of the U.S. economy, meaning businesses and policy makers alike don’t know for certain what’s happening.

“Our view of the economy is more based on vibes than verified information,” said Karl Schamotta, chief market strategist for the financial services company Corpay.

He says economists and businesses were relying on private sector proxies like credit card data, satellite imagery and surveys.

Schamotta says this fog has fallen at a crucial time. The U.S.-Canada trade war has caused deep uncertainty and sharp debate about whether, how and when tariffs would cause the American economy to slow.

U.S. President Donald Trump has said the tariffs don’t cause inflation and will help the economy, not hurt it.

But economists say tariffs drive up costs, all while feeding into deep uncertainty that weighs on investment and hiring.

Without clear, reliable data, people can say the economy is doing just fine or that inflation isn’t rising because there have been no reports that would contradict them.

“Ultimately, that just leads to a fog of uncertainty that you can project anything on. It’s like a Rorschach test for macroeconomic understanding,” said Schamotta referring to the psychological test in which participants describe what they see in various ink blots.

It’s like a Rorschach test for macroeconomic understanding– Karl Schamotta

Case in point, this week, White House National Economic Council Director Kevin Hassett was grilled by anchors on the financial news channel CNBC.

Hassett said he thought inflation was headed toward the Federal Reserve’s target.

“Even though it’s been increasing for five straight months as of September?” asked CNBC anchor Carl Quintanilla.

Hassett shrugged that off and pointed to the available data going back to January.

“I guess if you look at it from January, there’s ups and downs and seasonals. But yeah, it surprised on the downside. People were expecting it to accelerate and it didn’t,” he said.

Tim Duy, chief U.S. economist at SGH Macro Advisors, tweeted out Hassett’s statement pointing out that the government has no way of knowing whether inflation accelerated or not.

“But, but … we aren’t collecting the data with the government shut down,” he tweeted.

During the first Trump presidential term, his tariffs on steel and aluminum took about eight months to really bite into the U.S. economy and show up in the data.

This term, he started imposing tariffs in March — or about eight months ago.

“We’re in danger of hitting a point in the next couple of months where new data comes out and it shocks markets so badly that we see a wider burst in volatility or negative consequences for the economy,” said Schamotta.

Economists warn it will take some time to get even basic data back up and running.

Oxford Economics says nearly two dozen key reports have been delayed. It warns that list will continue to grow as the agencies try to catch up.

And that poses at least one pressing policy riddle. The Federal Reserve will have to make a decision on interest rates next month.

The Fed is currently split over the direction of the U.S. economy. Some members are pushing for more interest rate cuts while others are urging caution, concerned that inflation may have reared its head again this fall.

The Fed is “still stuck in a data fog,” wrote Nancy Vanden Houten, lead U.S. economist with Oxford Economics.

That fog will loom over the U.S. economy for months now. It could well be the new year before economists, businesses and policy makers have reliable data casting a light on where the economy really stands.