This Week's Rate Watch: Government Shutdown Drama and a Data‑Packed Calendar
The U.S. faces a midnight deadline to avoid its 15th government shutdown since 1981, and negotiations in Washington remain stalled. President Donald Trump warned Democrats that a shutdown would allow his administration to take “irreversible” actions, including cutting programs important to them reuters.com. The Senate is scheduled to vote again on a temporary funding bill today, but there are no signs it will pass reuters.com cbsnews.com, as Democrats seek extensions of expiring health‑care tax credits that Republicans say should be dealt with separately cbsnews.com.
This update reflects new information about the political impasse and its impact on economic data releases. The core insights about potential rate movements and data points to watch remain intact, but one additional data series — weekly jobless claims — has now been added to the list of reports that will be delayed in the event of a shutdown reuters.com.
For those of us watching from our couches, this saga feels a bit like binge‑watching a political drama—there’s suspense, a few cliff‑hangers, and yes, snacks are encouraged. Think of this as the “will they or won’t they” episode of Washington’s fiscal series.
1. Will the government shut down?
If Congress fails to pass a spending bill before midnight, federal agencies will shut down, furloughing many workers and halting non‑essential services. Recent developments include:
Escalating rhetoric: President Trump has threatened that a shutdown could lead to massive program cuts, telling reporters that “we can do things during the shutdown that are irreversible” reuters.com.
Still no deal: The Republican‑controlled Senate plans another vote on a continuing resolution, but Democrats have indicated they will not support it unless it includes an extension of health‑care benefits cbsnews.com. Observers see little chance of success before the midnight deadline reuters.com.
Expanding impact: Federal agencies are releasing contingency plans. Medicare reimbursements for certain home‑care services may be disrupted, some scientific research projects could be halted, and the Small Business Administration says it will stop issuing loans reuters.com. Up to 4 million federal workers, including service members and essential personnel, could go without pay abcnews.go.com.
2. Data delays: Jobs report and now jobless claims
The Bureau of Labor Statistics (BLS) has already said it will postpone the release of the September employment report if a shutdown occurs cbsnews.com. In an update on Tuesday, the Labor Department clarified that the weekly jobless claims report will also be withheld reuters.com. That means investors will lack two important labor‑market indicators if the government closes.
3. Expected economic data
If the government remains open, the official employment report is still scheduled for Friday, Oct. 3, and economists expect payrolls to rise by about 45,000–50,500 jobs investopedia.com cbsnews.com, with the unemployment rate holding at 4.3 % investopedia.com. However, if a shutdown occurs, markets will have to rely on alternative indicators:
ADP private payrolls (Wednesday): forecast to rise +50,000 jobs nasdaq.com.
JOLTS job openings (Tuesday): expected to decline slightly to 7.17 million nasdaq.com.
Conference Board consumer confidence (Tuesday): projected to slip to 96.0 nasdaq.com.
ISM manufacturing (Wednesday) and services (Friday) indices: expected to hover around the contraction/expansion threshold nasdaq.com.
Weekly jobless claims (Thursday): would provide an important signal about layoffs but will not be released if a shutdown happens reuters.com.
These reports will be closely watched because the Fed’s decision on whether to cut rates again at its Oct. 29–30 meeting depends on the trajectory of the labor market and inflation. The Fed already lowered its benchmark rate to 4 %–4¼ % in mid‑September federalreserve.gov after job gains slowed and the unemployment rate inched up federalreserve.gov.
4. Scenarios for rates
Scenario 1: Shutdown is averted
Congress reaches a last‑minute agreement, the BLS releases the September jobs report on Friday, and weekly jobless claims data arrive on schedule. A stronger‑than‑expected report could prompt bond yields and mortgage rates to tick higher; a weak report would support another Fed rate cut.
Scenario 2: Shutdown delays key data
No deal is reached, leading to a shutdown. The Labor Department suspends the jobs report and jobless claims releases cbsnews.com reuters.com. Markets must rely on ADP payrolls, JOLTS, and private data. Rate expectations become more uncertain, and volatility likely increases. RBC economist Mike Reid says a data‑dependent Fed with limited visibility may pause rate cuts cbsnews.com.
Scenario 3: Prolonged shutdown
A shutdown extends for several weeks. Each week trims about 0.1 percentage point off GDP growth abcnews.go.com and erodes consumer sentiment abcnews.go.com. Up to four million federal employees and contractors go without pay abcnews.go.com, while agencies halt research, loan processing, and other activities reuters.com. Such drag could push the Fed to act more aggressively later, but inflation concerns persist nasdaq.com.
5. Market watch
Bond yields moved lower earlier this week on expectations of weak labor data and the growing risk of a shutdown, with the 10‑year Treasury around 4.14 % nasdaq.com. Futures markets still price in a high probability of another 25‑bp rate cut at the end of October nasdaq.com, but that could change quickly if the political situation or data outlook shifts.
And because life isn’t all spreadsheets and yield curves, a little levity goes a long way. As we await a resolution, keep your coffee cup filled and maybe tuck away a chocolate bar — call it your shutdown survival kit. After all, financial markets may be serious, but your mood doesn’t have to be.
We will provide a further update later in the week after we know whether a shutdown occurred and how markets react.
