Market Analysis

“Non-Essential” Data

With some federal agencies’ closures this week, new (and some historical) US economic data are offline—some fear the lack of official statistics may eventually shutdown markets, too.

Just because official data are down doesn’t mean the Fed gets to snooze—plenty other economic measures are still reporting. Source: Mark Wilson/Getty Images News.

When weighing the impact of the government shutdown, it’s easy to focus on the obvious closures: national parks. The Smithsonian. The National Mall. Washington, DC trash collection. But some less visible agencies are offline, too—like the economic statheads at the BEA, BLS and Census Bureau. This has sparked yet another shutdown fear: Without fresh economic data, how will investors, businesses and the Fed know how the US economy is doing? Many worry this lack of information will hurt stocks, and the longer the shutdown lasts, the more markets suffer. Well, good news! Markets are forward-looking. Stocks lead economic activity, so they don’t need data releases to tell them where to go. Plus, other sources publish economic data, too—often complementing (if not mirroring) government stats. Details regarding US economic health will get published with or without official statistics—investors will have plenty to go on.

So will the Fed, despite the Labor Department’s announcement the September jobs report won’t be released Friday—the source of Thursday’s data doldrums. Particularly, many wonder how the Fed can track US economic health without knowing the unemployment level, and how that could impact its decision whether or not to start tapering its quantitative easing (QE). It’s true the Fed has tied QE guidance to the official unemployment number, but policymakers have plenty more ways to gauge the labor market’s health. For one, private payroll company ADP recently released its job growth data—a decent proxy for the BLS’s private payroll tally (and for those who doubt the integrity of government data, it’s perhaps preferable). State agencies are also still collecting and reporting weekly jobless claims. Gallup Polls and the Conference Board can offer some insight on the employment situation as well. The Fed might not get the official unemployment rate (assuming a little birdy from the BLS didn’t slip them preliminary data before going on furlough), but they’ll have plenty of labor market data at their disposal—they can still make decisions (though whether decisions follow logic, as ever, is another matter).

So will anyone who wants to get a measure of the US’s economic health. Many other official data releases have alternatives, too. Inflation data are also covered by PriceStats and MIT’s Billion Pieces Project, and producer prices are covered by various private sector indexes. The National Association of Home Builders and National Association of Realtors cover much housing data; the Institute for Supply Management covers manufacturing and nonmanufacturing—and its PMI surveys also include employment and exports. Regional Federal Reserve Banks track services and manufacturing output, too, and foreign nations’ trade data usually break down imports from and exports to the US. Plus, many retailers make their sales publically available, giving a rough estimate of consumer spending. And of course, publicly traded corporations still report earnings—and every other country on Earth will continue reporting data as usual.

On individual levels, these alternative reports only show snippets of the US economy, but collectively they paint a fairly comprehensive picture of US economic health—just like all the snippety government data that collectively add up to GDP (hence why GDP is so backward-looking—it largely aggregates previously reported monthly data). Hence, markets will still receive and digest a good amount of US economic data—another reason we’d argue less government data doesn’t mean more uncertainty.

Not that markets even need this data drip. Stocks are forward-looking—they move ahead of economic data releases. Markets know—whether data are gathered and disseminated by government or private agencies or no one—economic activity will continue. Stores will still sell goods, the US will still trade with other countries, and companies will hire and invest when it makes sense for them to do so. And markets are darned good at digesting this instantaneously, well before results are reported. Economic data releases merely confirm what markets already know. Sometimes the data are a surprise to humans, and their short-term emotional reactions make it look like data releases drive markets. But don’t be fooled by this short-term noise. The more important moves come as markets continue weighing what really matters—the likelihood of future corporate profitability—and they don’t need governments’ economic stats to gauge this.

Hence why stocks shouldn’t be materially affected if government-gathered data remain on lock down or come back skewed from missing earlier reports. Worries over congressional shenaniganery may rock markets in the short term, but over time, fundamentals rule no matter who releases a backward-looking report on their details—something investors should remember next time the BEA takes down its data.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.