As the potential US government shutdown nears, pivotal economic data's release is at risk, putting a spotlight on third-party indicators. Without access to key reports such as the Labor Department's monthly employment statistics and the Commerce Department's inflation metric, stakeholders are turning to alternative data sources. Recently developed trackers monitoring job openings and economic trends will now be in focus. These established and emergent third-party data sources have sometimes been consulted by policymakers, including the Federal Reserve, in their decision-making processes, especially during unprecedented circumstances.
Third-party indicators, such as the business activity metrics from the Institute for Supply Management and private payroll data from ADP (ADP), have played a role in guiding Federal Reserve decisions. Especially during trying times like the early pandemic, these alternative data sources were pivotal in the absence of government-generated statistics. However, while these alternatives have proven valuable, they are generally deemed secondary to established data from agencies like the Bureau of Labor Statistics, Census Bureau, and Bureau of Economic Analysis.
The pending government shutdown on October 1st, instigated by far-right House Republicans, could result in a protracted data blackout. This dearth of information, compounded with other economic factors like the restart of student-loan payments and rising energy costs, poses significant challenges for the Federal Reserve's policy decisions in the upcoming Oct. 31-Nov. 1 meeting.
Third-party data, though increasingly available and sometimes impactful in policy decision-making, presents a different challenge. Their accuracy and reliability, compared to 'gold-standard' government data, are still debated among economists. Yet, as the landscape evolves, stakeholders may find themselves relying on these alternative sources more frequently, especially during uncertain times.
