The Quiet Impact of a Government Shutdown

What was the unemployment rate in September? Did orders at US factories go up or down over the last month? Are job hirings up or down?

The questions go on, unanswered. With the US government shut down, private-sector leaders are searching for alternatives to the data the US government routinely provides. The federal agencies responsible for US economic indicators, including the Bureau of Labor Statistics, Bureau of Economic Analysis, and Census Bureau, suspended the collection and distribution of data on September 30, after lawmakers couldn’t agree on funding for the government.

This week, leaders would have learned how many people applied for mortgages and jobless benefits. If the shutdown continues through next week, reports on inflation, retail sales, and business inventories likely will be pushed back or even canceled. “Most CFOs have their teams doing their own bottom-up analyses,” says Jeff Constable, co-leader of Korn Ferry’s Global Financial Officers practice.

A lack of government data isn’t as crippling as it would have been 10 or 15 years ago. Many companies have invested in systems that give their organizations granular looks at consumer-spending patterns, pricing, and other information. Still, experts say most companies are hoping the government statistics aren’t delayed too long. A surprising number of industries use a myriad of government reports to help shape their own investment decisions. Banks and asset managers, for example, use inflation and economic data to determine the types of risks they are willing to take with investments. Insurers and health researchers depend on up-to-date demographic and health statistics. Real-estate developers and builders need immediate updates on housing demand, while agriculture firms rely heavily on livestock-production and weather data.

Not all government-related economic insights are frozen. On Tuesday, the Federal Reserve Bank of New York released its monthly survey on inflation expectations, showing that consumers can expect moderately higher prices over the next 12 months. Federal Reserve Bank governors will also be speaking at various conferences they had already been scheduled to attend.

Some private firms have issued their own reports. ADP, a large payroll processor, routinely issues monthly job-market data (it sent out its latest report right before the government shut down). Others are making their data more accessible. Indeed, this week one large private-equity firm, which normally compiles its own economic data for proprietary use, released statistics to the public suggesting that the US job market and economy may be slightly less resilient than recent official stats have indicated. And there is one other option: Some firms that feel they need data immediately are willing to pay for immediate alternatives. “The hedge-fund world has been doing this for a long time,” says Matthew Siegel, a principal in Korn Ferry’s Global Technology, Marketing Officers, and Media practices.

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