Shutdown means Fed has no idea how GDP is really doing

By Irina Ivanova

/ MoneyWatch

GDP growth clouded by trade war with China

In his first two years as president, Donald Trump has frequently promised that the U.S. economy will grow 3 percent annually, breaking a decadelong streak of modest expansion. Just one problem right now: With the partial government shutdown, nobody is tracking how the economy is doing.

The Department of Commerce, which houses the agency that collects and reports the gross domestic product—the broadest measure of economic activity—is among those closed since Dec. 22 for lack of funding.

The GDP figure for 2018, scheduled for release on Jan. 30, will not be issued if the partial shutdown continues much longer. Even if the government has fully reopened by month's end, it's not likely federal workers would have had enough time to produce the scheduled report on the nation's gross domestic product, according to the Associated Press.

Federal Reserve Chairman Jay Powell on Thursday expressed worry that the shutdown would affect the gathering of "the pretty important data" that the Fed relies on to make decisions about monetary policy. "We would have a less clear picture into the economy if it were to go on much longer," Powell said.

Already, some economic reports have been missed, including a monthly report on factory orders that shows how much companies are spending on large equipment. Government data on home construction and retail sales won't be released next week because staffers who compile those reports have been furloughed.

Trump touts economic growth after a rocky week

The jobs report scheduled for release in February will go out as planned, because it is produced by the Labor Department, which is funded. But it is likely to be distorted, since it likely will count 380,000 furloughed government workers as unemployed.

"If the shutdown continues through this Saturday [Jan. 12], the unemployment rate is likely to be boosted by about 0.2 percentage point," Ben Herzon, executive director at Macroeconomic Advisers, said in a note this week.

That would bring the official unemployment rate above the 4 percent mark for the first time in half a year.

Even once the government is fully reopened, the effects of the shutdown would persist for several months, analysts said. "[I]t may take some time to get a 'clean' read on the economy," Bank of America Merrill Lynch noted.

First published on January 11, 2019

© 2019 CBS Interactive Inc.. All Rights Reserved.

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