Fed Watch – 10/3/2025

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hi, I’m Lauren Saidel-Baker, and thank you so much for joining me for this October 3rd edition of Fed Watch.

Well, it should be Jobs Friday, but we are in the midst of a federal government shutdown and that is delaying a lot of economic data that we are following. We’re going to get to that, the economic impacts of this shutdown and specifically what it means for the Fed, who’s a little bit light on data right now. But before that, I want to provide a quick update on a story that we’ve been following, specifically about the Trump administration’s efforts to fire Lisa Cook from her role at the Federal Reserve.

So if you remember, back in late August, Trump moved to fire Ms. Cook and she filed a suit in order to stay in her job. While lower courts had ruled in Cook’s favor, the Trump administration then elevated this issue to the Supreme Court. And just this week, the Supreme Court deferred action on the decision. So what that means is they said that Cook can remain in office until they hear oral arguments in this case, that should come sometime in January. So we are delaying the final outcome, we probably won’t get a decision until around June of next year, but at least for the interim, Lisa Cook does remain in her role.

Now let’s turn to the story of the day, that is the federal government shutdown, and specifically as an economist, we’re asking two questions here. The first one is, what is the economic impact? As I’m sure you know, federal government spending accounts for a fairly sizable share of gross domestic product. So there are some real risks to growth here. I think those risks start to compound the longer this shutdown goes on and the deeper we get into it. But we’re going to save that for some other ITR blogs and other messaging that will be coming out.

Today, I really want to focus on the other half of the equation, and that is the data release. A lot of the data that we get as economists, that the Federal Reserve is looking at, some of the best quality data does come from our federal government. So with this shutdown, we simply aren’t getting that data. Today, this morning at 8:30, there was no jobs release, we don’t get those numbers. And it isn’t even a matter of if, say, something moves through Congress, we get the continuing resolution, we turn the government back on, that we’ll necessarily see all of those data releases come in right away. There has to be time taken to collect this data to prepare it, and that work is currently not being done. So that puts us in a little bit of a void. We’re waiting for further data to see just how the economy is progressing. And more importantly, for the Fed, how they’re balancing that labor market and inflation side of their dual mandate.

So today, what we do know is that there’s going to be a space, right? We’re going to have this delayed time and at the margin, I think that might cause the Fed to hesitate a little bit more than they would have if we had this, again, high quality data clearly showing either that cuts are needed or that they aren’t needed depending on how you analyze the data. But we do still have some information. There’s, for example, private payrolls data. That’s not the highest quality data source, but it does tend to move in something like a correlation with these official numbers that we tend to focus on.

So the question is, how can we do our jobs as economists and well, just as folks who are interested in seeing what’s happening? And I want to tell a story of actually when I was first hired here at ITR Economics. One of the questions that Brian Beaulieu asked me in my interview was, “Do you play any instruments?” Now, at first I thought this was kind of an innocuous question, just getting to the personality and hobby side of the interview, but it turns out it was actually much more than that because after he revealed to me that he, as a chief economist, really prefers to hire musicians as economists, simply because musicians are used to listening to a whole range of an arrangement of music, right? We’re looking for that one note that’s out of tune. We’re finding it, we’re isolating it, but we’re also able to take in this broad story of what’s happening on the treble clef versus the bass clef. I think it did help me at the time, by the way, that I play five instruments. Maybe that’s why I’m in this job to begin with. But I like that analogy for what’s happening in the economy today.

Our economy is a symphony. We have this whole orchestra playing and with the government shutdown, we don’t have certain data sources delivering us that information. So maybe today we lost the woodwinds and part of the string section, but if we’re listening to the rest of the music that’s being played, we can still tell you what song is being played by this economic orchestra. So we at ITR, we are looking for that whole suite of leading economic indicators. We’re looking at how these trends have looked historically, even if we don’t have perfect data, we do have something and we can still see what’s going on.

So that’s what we’re going to continue bringing you to here on Fed Watch and elsewhere in our other ITR Economics programs. If you need help tuning out the noise and listening for that music, please reach out to our team here. But otherwise, I hope you’ll stick with us and join me next week right here on ITR Fed Watch. Take care.