FINfacts XXIV – No. 477

How many times have we heard Fed Chair Powell state that “we will continue to take a data-dependent approach” when it comes to setting interest rate policy? But what if there is little or no data? This week saw various private sector data points magnified in importance as the government shutdown continues to silence the BLS and other agencies. No big monthly jobs report was released today. Treasury yields whipsawed this week on conflicting data. Tuesday’s ADP employment report indicated private businesses created 42,000 jobs in October, the first increase in three months. Most of the new jobs were concentrated in transportation and healthcare while the bellwether sectors such as leisure and hospitality fell. The 10-year Treasury opened the week at 4.06% and jumped to 4.16% after the ADP release.  

Wednesday’s release of the well-respected Challenger Report indicated companies last month plan to cut 153,000 jobs, the highest October reading since 2003. That represented a 183% surge from September and 175% higher than the same month a year ago. It was the highest level for any October since 2003, and 2025 has been the worst year for announced layoffs since 2009. Seeing metrics hit 2003 and 2009 levels seem significant. Looking back at 2003’s employment shock from early tech disruption, we have to ask: is AI triggering a similar labor market transformation today? Challenger reports the highest level of layoffs coming from the technology sector, nearly six times the September level, amid a period of AI integration. Challenger Report: “Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes. Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market.”  The 10-year Treasury dropped to 4.08%.

Today’s University of Michigan Index of Consumer Sentiment indicates that the shutdown itself putting pressure on consumers. The index dropped to its lowest level in over three years and just above its worst level ever, a 6.2% decline from last month and down 30% from a year ago. The “current conditions” index was the lowest in the 75-year history of the survey. What will the Fed do without data? Odds for a December rate cut are at 72% in the futures market (last month it was over 90%). Fed Governor Goolsbee’s comments this week show a reluctance to cut in the absence of data: “Medium-run, I’m not hawkish on rates,” he said. “When it’s foggy, let’s just be a little careful and slow down.” If the government does reopen soon, there are various scenarios for if and when the delayed data will be released, if ever, as much of the time-sensitive surveying that forms the basis of these reports is not being conducted. Stay tuned….

By David R. Pascale, Jr., Senior Director