The current shutdown of the U.S. government became the longest in history this week, entering its 36th day on Wednesday. The outlook for resolving the shutdown is as murky as ever. While new compromises are being floated, confidence from lawmakers seems low. Pressure will build as constituents have to tolerate travel delays, cuts in food aid, and other more visible signs of the shutdown the longer it goes on. Just as cloudy is the picture of how the economy has been evolving since August, the last month covered by official statistics for most measures.

The dearth of federal government data has us looking to other indicators to assess the state of the economy. The preliminary November reading for the Michigan Survey of Consumer Sentiment showed consumer confidence sliding for a fourth consecutive month – reaching a three-year low. Most of the pullback was due to a further decline in consumers’ perception of current economic conditions, which fell to the lowest level on record (dating back to early 1980’s). The survey also showed that inflation expectations remained elevated at 4.7%. Moreover, only 37% of surveyed households think that “now is a good time to purchase large household goods” – the lowest level since 2022 when the Fed first started to raise its policy rate. And this negative sentiment appears to be spilling over to the hard data, with vehicle sales falling to a 17-month low of 15.3 million in October. 

The ISM monthly surveys of firms in the manufacturing and service sector are usually helpful indicators of the direction of the economy. Across both sectors, employment remains in contractionary territory, but encouragingly, has been declining at a slower rate. Meanwhile, price growth remains elevated, particularly in the services sector (Chart 1), which complicates the interest rate outlook, especially given the firming in inflation expectations in the Michigan Survey. 

Outside of the ISM’s, we also received several other alternative private sector readings on the labor market. ADP estimates of private payrolls rose 42k in October – a modest pick-up from September where job growth contracted by 29k – bringing the three-month moving average to a meager 3k per-month. Meanwhile, Challenger job cuts surged to 153k last month – a six-month high. The Chicago Fed’s estimate of the unemployment rate ticked a touch higher to 4.4% for October. But encouragingly, state-level jobless claims remain low and relatively stable (Chart 2). Federal Reserve Governor Lisa Cook noted this week that hiring is slowing according to job posting data. 

While this slew of indicators is mixed, with some showing more weakness than others, the overall message is that the job market is probably hanging in a state of semi-stasis, what we have been calling “low hire, low fire”.  As we turn the page on this week, the big question still in our heads is how long we will be looking at the economy through this clouded, half-closed lens – and for that, we will need to see if there is any hope of the government shutdown resolving soon.