The Federal Reserve is widely expected to announce its third interest rate cut of the year today, Wednesday, December 10th.
The Expected Move and the Data Challenge
Traders are largely anticipating a modest 0.25% reduction in the key interest rate, consistent with the size of the previous two cuts.
However, the Fed’s rate-setting meeting in Washington is being conducted under unique and challenging circumstances: a “data blackout” resulting from the prolonged federal government shutdown this fall. This has created a significant hurdle for the Federal Open Market Committee (FOMC) members, who are tasked with balancing conflicting economic goals—controlling inflation versus supporting employment—with incomplete information.
Missing and Stale Government Data
The shutdown caused the cancellation or delay of several crucial economic indicators:
| Data Report | Status | Original Release/Re-release Date |
| October Jobs Report (BLS) | Canceled | – |
| November Jobs Report (BLS) | Delayed | December 16 |
| October Consumer Price Index (CPI) | Canceled | – |
| November Inflation Data | Delayed | December 18 |
The only recent government data releases are both backward-looking and offer mixed signals:
- Inflation: The Fed’s preferred inflation gauge, Personal Consumption Expenditures (PCE), showed a rise to 2.8% in September (up from 2.7% in August). This suggests stubborn inflation but the data is months old. Separately, the report indicated that consumer spending was flat in September, with non-volatile spending up only 0.2%.
- Labor Market: The Job Openings and Labor Turnover Survey (JOLTS) released Tuesday showed discouraging labor market dynamics, with the hiring rate back at a low of 3.2% and the quit rate falling to a new low of 1.8%.
Alternative Data Points to a Slowdown
In the absence of official government reports, alternative data is heavily suggesting a slowing labor market:
- ADP Private Jobs Report (November): This report showed a net loss of 32,000 jobs nationwide.
- Critically, the ADP report indicated that small businesses shed a whopping 120,000 jobs during November.
This lack of current, reliable data puts the FOMC in the difficult position of judging whether the recent signs of a slowing labor market necessitate an immediate rate cut, even while inflation indicators suggest ongoing price pressures.
