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The Other Reason The Fed Is Terrified Of A Government Shut Down

Tyler Durden's picture




 

While some have argued that the Fed is flying blind, given their endless efforts to convince the market that their actions (or inactions) are now all data-dependent - what happens when that data simply does not exist? As SMRA notes, the official word from the BLS is that they are working under the assumption that there will not be a government shutdown and the employment data will be released as scheduled; but what happens if the un-negotiation reaches beyond October 1st? How will our central-planners know what to do?

Via Ray Stone of Stone McCarthy,

The official word from the BLS is that they are working under the assumption that there will not be a government shutdown and the employment data will be released as scheduled.

That said, the Bureau does recognize that there is a risk of a shutdown and such could have implications for the timing of the Employment Situation release, and possibly other releases depending on the duration of the shutdown.

If there is a shutdown, the BLS won't be able to tell us when the employment data, and other key economic reports will be released until after the shutdown ends.

If the Federal Government shuts down on October 1 some BLS employees will report to the office to provide for an orderly shutdown. No new work will occur, but computers will be shutdown to prevent problems. Those workers that worked from home or in the field will be forced to turn in laptops, and BLS provided cell phones.

A shutdown will interfere with the processing of the employment data, and depending on the duration could very well lead to a delay in the release.

Specifically, the prospective October 1 shutdown would be the Tuesday of the week in which the employment release is scheduled. Most of the work on the Household survey (unemployment rate, etc) should be completed by this time. But, as of Tuesday there will be much to be done to prepare the establishment (payroll data).

Typically, the Monday of this employment week is that last day for the collection of responses to the survey. On Tuesday and much of Wednesday the establishment data are processed, and checked. This process is usually completed by late Wednesday afternoon. On Thursday the Employment Situation release is crafted. And on Friday the data are released at 8:30am eastern time.

Should the possible shutdown last only one-day (Tuesday) it still may be possible to release the employment data on Friday. But if the shutdown is anymore than one-day a postponement of the release seems likely.

The BLS will require a few days beyond the shutdown to process the data, quality check the numbers, and prepare the release. Thus, the release of the employment report will be at least a few days beyond the reopening of the government. Remember, no processing, quality checking or report preparation will occur during the shutdown.

The exact timing of the employment release will not only depends on the timing of the reopening of government, but also on the timing of other BLS releases. Conflicts with other indicators will factor into the timing decisions.

The December 1995-January 1996 shutdowns and January Blizzard, which shutdown Washington DC for a few days, caused a delay in the release of the December 1995 Employment Situation release by 2 weeks. Other economic statistics were also delayed. Moreover, the collection of survey data used to compiled the January statistics to be released in February 1996 was compromised to a degree.

The December 1995 employment release came out on Friday, January 19, 1996. The loss of processing time, did not allow for revisions to be made to the November 1995 data, but did provide for the routine revision to the October 1995 data. Due to the delay the BLS actually had more time to collect responses to the December 1995 payroll survey. The response rate for that report rose to 69.1% for the first closing on December 1995 payrolls, up from 56.6% in December 1994.

 

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