Ordinarily this month’s Outlook would be based on the advance data for the third quarter. But even though the government shutdown has ended, it will be a while before that data is available. As a result our “revised” forecast for this month has only a few crumbs of actual new data. Those crumbs have not changed our outlook in any significant way.
NIPA Data
No new data.
Other Data
Most of the monthly data we follow (and use in our model) has also been halted by the shutdown.
This includes data from the Bureau of Economic Analysis for consumption expenditures and prices, manufacturing orders, and construction. Similarly for labor market data from the Bureau of Labor Statistics.
BLS data for consumer and producer prices has also been halted. But they reopened for a few days to produce their September CPI release, which was needed to calculate Social Security cost-of living adjustments for 2026. It showed month-over-month increases that were down slightly from August, while 12-month inflation was little changed.
The Treasury Department has continued to report financial data including for interest rates. Data for Treasury securities are shown in the lower right on the following page. In late October the Fed lowered the federal funds rate (its policy instrument) by one-quarter point. This was its sixth such reduction since August of last year. As shown in the chart, the short end of the yield curve has come down by the same 1.5%, matching the Fed’s change. At the long end of the curve, however, rates are significantly higher.
Other data are available from non-federal government sources. One that we use in our model is consumer sentiment from the University of Michigan. Its measures have been declining since July, including in preliminary data for November. The four-month decline is 18% for the overall index and 15% for expectations.
In the labor market there is data available from firms such as Automatic Data Processing. ADP produces a monthly estimate of the change in national private sector employment (shown in the upper right of the Recent Data page). Month-to-month it loosely tracks the private sector measure from the BLS, but over longer periods the fit is closer. It indicates that job creation has continued to slow in the past two months.
Finally, while the weekly BLS reports on new claims for unemployment benefits have been halted, much of the underlying data can be assembled from state level sources. The results suggest that the number of new claims has been relatively stable. And, a measure of the unemployment rate constructed by the Chicago Fed indicates that during September and October the rate remained close to the 4.3% reported by the BLS for August.
Overall, these scraps of new data contain nothing to change our view of the economy from a month ago.
Baseline Forecast
The result is that our model is using data that is nearly unchanged from last month. Unsurprisingly, as shown above, our “revised” forecast is also almost the same as a month ago.
Discussion
In these forecasts the strength of the 2nd quarter partly carries forward to the 3rd quarter. Then in the current quarter and the first quarter of next year we expect slower growth. The slowdown results from weakness in both consumption and investment. Some of this reflect some pay-back from strong spending during the previous three quarters, which we think was partly a “beat-the-tariffs” phenomenon. For consumers we also expect caution as conditions in the labor market weaken further. For business, we think the uncertainty surrounding government policies in general, and trade policy in particular, will produce reluctance to place investment bets on expansion.
Hopefully we will soon have some real data to work with.