When a government shutdown halts the release of essential economic data, economists lose the nation’s most reliable gauges of employment, growth and inflation. But they don’t stop analyzing – they start improvising.
Box office receipts, restaurant reservations, cardboard production, even data on garbage collection can give valuable clues to how American businesses and households are faring, particularly in this time of broad economic uncertainty. And while economists agree none can replace the scope and rigor of federal figures, until that data starts flowing again, analysts are turning to an amalgamation of narrower public and private figures to try to understand the economic trends.
“Economists are curious people,” said Allen Bellas, economics and finance professor at Metro State University who directs the graduate program. “And there are benefits of figuring out a good indicator that people might not have thought about before.”
When the government shut down on Oct. 1, some of the workers responsible for collecting, analyzing, and publishing the data that informs policy and business decisions also stopped working. Since then, the Bureau of Labor Statistics has not released the planned September jobs report and has delayed the release of the September Consumer Price Index, a measure of inflation, from this week to Oct. 28. This figure is usually used to calculate the Cost of Living Adjustment for the country’s nearly 70 million Social Security beneficiaries, ensuring that their checks keep up with rising prices.
Related: Missing economic data: Social Security cost-of-living increase announcement delayed
This data is considered an important gauge of the broader economic environment. States and municipalities, businessowners, investors, and even households use it to make investment, employment and spending decisions. Meanwhile, academics and private-sector economists use the federal data to inform their growth models, predict recessions, and provide quality research that others rely on for decisionmaking.
But researchers have learned over the years that there are other indicators they can turn to as measures of past and future economic performance. This has proven especially helpful when studying countries that do not have the resources for data-gathering or where there are concerns over possible government data manipulation.
But researchers have historically been able to rely on the U.S. for accurate and timely data.
“Most other countries do not have the kinds of data we collect. And the reason we’ve done this is because it benefits our citizens, our taxpayers, our businesses. So they’re the ones that are going to be impacted the most,” said Erin McLaughlin, senior economist at The Conference Board.
Pandemic pushed economists outside the box
Given the importance of timely data during the pandemic, economists turned to real-time data to supplement the monthly or quarterly figures from the federal government.
Some of the indicators economists used to try to understand the changing environment since the beginning of the pandemic include:
- Demand for cardboard boxes
- Pollution data
- Garbage collection data
- State uninsurance claim numbers
- Daily airline passenger traffic from the Transportation Security Administration
- Credit and debit card transactions from card companies
- Port and rail activity
- Labor market data from payroll processing companies such as ADP and UKG
- Restaurant booking data from the reservation company OpenTable
- Occupancy rates from hotels
- Home listing and sale prices from Zillow and realtors
These indicators have continued to be used and economists went from forecasting the future to “nowcasting,” using the wealth of unconventional data available to sketch out a “real-time measure” of the changing costs of goods and services, the hiring environment, and consumer confidence, which are crucial for time-sensitive business and household decisions, said George Tawadros, associate professor of economics at Winona State University.
While useful in the moment, nowcasting does not provide the holistic economic view needed for longer-term planning.
“Those are good indicators, but they are subsets of what is happening in the economy,” said Marcus Bansah, associate economics professor at St. Olaf College in Northfield. For informed decision-making, a more holistic approach is required, and that requires the federal government.
Ming Lo, economics and finance professor at Metro State University, puts federal data into three broad buckets: labor market statistics, including the unemployment rate and job vacancies; output-related data, such as gross domestic product; and price data, such as the CPI inflation index.
Each category of federal data can be captured using imperfect private or state level metrics to some degree, Lo and other economists said.
The labor market can lean on state unemployment rolls for data, and there are a number of private firms generating their own data and selling it, such as payroll processors UKG and ADP or jobs search websites Glassdoor and Indeed.
The value of everything the economy produces, or GDP, is difficult to measure without BLS data. This stymies businesses that want to know if the economy is growing or shrinking, so they can make well-informed decisions on whether to hire more employees, boost output at a particular factory, spend more on advertising in certain markets, or invest in a new facility.
Government agencies also face similar decisions that they cannot adequately address without an understanding of the broader economy. If public officials can see that a key industry in their state or city lacks enough workers, they can connect businesses to trade schools or implement a workforce development program to create a pipeline to that industry.
The federal government also has the added, mandatory, responsibility of sending out Social Security checks to nearly 75 million Americans. The amount each beneficiary receives is tied to inflation, which is normally measured by the Consumer Price Index, a figure which failed to be released on time this week and is now slated for Oct. 28.
“For measures like job openings or unemployment claims, there are reasonably good alternative sources. But for others, the void is much harder to fill. Pricing data, particularly inflation, is a prime example — there’s no true substitute for that information in the private sector,” said Allison Shrivastava, an economist at Indeed Hiring Lab.
Economists still trying to make best guesses despite being in the dark
Some economists are not concerned with the broader data lapse, because while major headline figures are being delayed, some agencies are continuing to put out data, such as the Federal Reserve, which is self-funded and therefore not directly affected by the shutdown.
Paul Kasriel, an independent economist and former Northern Trust chief economist, said the data the government is still publishing is enough for his research on monetary quantities in the economy, specifically the sum of bank credit, currency in circulation, and bank deposits.
“The Fed continues to publish these data weekly, so I’m good with this,” he said.
Kasriel said he relies more on unemployment claims than the BLS jobs report, which he considers “close to useless” due to its frequent revisions. “These data count real people who have an incentive to get in line to collect benefits,” he said of unemployment claims.
However, the exception for him is the CPI report, he said. “That’s the one piece of government data I really do miss.”
Michael Pearce, deputy chief U.S. economist at Oxford Economics said the firm can still make educated forecasts even when official data goes dark — for a while.
“At this stage when we’re only missing a month’s data, we’re operating under pretty foggy skies, but we have a pretty good idea of where things stand,” Pearce said. “Relative to other advanced economies, we still have one of the best data systems in the world.”
Economists are using proxies like private payroll data, unemployment claims, card transactions, gasoline demand, and other measures to model the missing figures, though the outcomes are imperfect.
“These private data don’t have the statistical power to tell us if we’re going into a recession,” he said. “The official data serve as the anchor — the benchmark — for all these private models.”
If the shutdown extends for months, he warned, the lack of government data could start influencing actual decision-making at the Federal Reserve and on Wall Street.
Even though economists agree that creative alternatives exist, the U.S. government’s statistical system remains the backbone of economic analysis.
“Government data is really the gold standard for inflation and it’s needed for markets to function,” said Courtney Shupert, economist at MacroPolicy Perspectives.
“There’s no perfect substitute. Many private estimates are benchmarked to government data — especially regional indicators that rely on federal statistics for weighting and sampling,” she said, adding that regional and industry estimates are often benchmarked to federal statistics for sampling and weighting.
Economists noted that the last government shutdown in 2018-19 did not lead to this level of data disruption, and it also did not occur during a time of so much uncertainty around trade and the economy.
“The last shutdown did not occur during a moment of big change like what we’re seeing lately, which is a decrease in immigration, unemployment ticking up, less job openings, and early signs of consumers feeling some pressure,” Shupert said.
Those pressures on businesses and households add to the importance of understanding the current state of the economy, even if what we get is an imperfect picture with the lack of federal data.
For now, the shutdown is a stress test of the private sector’s data capabilities, and a reminder of how much our economic system still depends on the public ones.
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