Because of the federal government shutdown that began October 1, the data that I usually discuss in this newsletter are not being published. That leaves economists, market analysts and policy makers – notably those at the Federal Reserve – trying to figure out how the economy is doing based on private-sector data that are unaffected by the shutdown.

Declining payrolls, rising hiring intentions

The monthly employment report, which includes nonfarm payroll employment and the unemployment rate, usually is the most important data release of the month for financial markets and most economists. It was scheduled for October 3 but wasn’t published because of the government shutdown. ADP, which processes payrolls for many companies, published its estimate of private payrolls on October 1 (see chart above). It showed payrolls declining by 32,000 in September.

Employment rose at large businesses but declined at small and mid-sized businesses. Echoing what we’ve seen in the government data, there was a big increase in employment in education and health services but declines in most other sectors.

Challenger, Gray and Christmas reported on September 25 that – based on hiring announcements from US employers – it “expects seasonal retail hiring in 2025 to fall to its lowest point since the recession-hit season of 2009.” It also reported that layoff announcements are well above business-cycle lows but haven’t surged like they normally do at the beginning of recessions.

On a brighter note, the National Federation of Independent Business reported on October 3 that hiring intentions rose for a fourth straight month in September, to their highest level since January. Historically, hiring intentions have led the increase in nonfarm payrolls by about four months.

Production goes up, new orders fall

Retail sales were to be reported on October 16 but weren’t. But CNBC and the National Retail Federation publish an alternative measure, the CNBC/NRF Retail Monitor, every month. The Retail Monitor showed total retail sales down 0.66% in September, with “core” retail sales, excluding restaurants, automobile dealers and gas stations, down 0.49%. Despite the monthly declines, total retail sales were up 5.32% year-over-year, and core retail sales were up 5.72%.

Light vehicle sales are reported by auto companies and aren’t affected by the government shutdown. They edged up to a 16.4-million seasonally adjusted annual rate in September and still don’t show the adverse impact from tariffs I expected.

Even though the Federal Reserve has not been directly affected by the government shutdown, it could not report industrial production this month because it uses data from other government statistical agencies to calculate industrial production. On October 1, the Institute of Supply Management reported that the production component of its Purchasing Managers Index (PMI) rose from 47.8 in August to 51.0 in September. It has remained between 44.0 and 54.6 for more than three years.

The above-50 reading in September indicates that more companies reported rising production than falling production and suggests a small increase in industrial production. But the new orders component of the PMI, which leads industrial production, went the other way, falling from 51.4 in August to 48.9 in September.

The monthly housing report, which includes data on housing starts and building permits, was not released as scheduled. The National Association of Home Builders/Wells Fargo Housing Market Index, reported on October 16, rose five points in October to its highest level since April, but remains at a historically low level. (In September, it was at its lowest level since 2022.)

Weekly data on mortgage applications, from the Mortgage Bankers Association, also are available. Mortgage applications for purchases fell for a third straight week in the week ending October 10 but still were up 20% year-over-year after rising from January into September as mortgage rates declined.

Consumer sentiment not mirroring gas prices

The Conference Board reports its Consumer Confidence Index® monthly, and the University of Michigan reports its Index of Consumer Sentiment twice a month: a preliminary index near mid-month and a final index near month-end. Confidence fell in September to its lowest level since April, when it was dragged down by President Trump’s “Liberation Day” tariff announcement. Sentiment fell in early October to its lowest level since May. Most of the time, sentiment is driven by gasoline prices, but during periods of high or rising unemployment, sentiment is driven by labor market conditions. That seems to be happening now. Sentiment has declined even though gasoline prices are nearing four-year lows (see chart below).

Eight times a year, the Federal Reserve publishes its “Beige Book,” which summarizes economic conditions in the 12 Federal Reserve districts, based on “comments received from contacts outside the Federal Reserve System,” i.e., anecdotal evidence, not data. According to the Beige Book released on October 16 (summarizing information received by October 6), “Economic activity changed little on balance since the previous report, with three Districts reporting slight to modest growth in activity, five reporting no change and four noting a slight softening. Overall consumer spending, particularly on retail goods, inched down in recent weeks, although auto sales were boosted in some Districts by strong demand for electric vehicles ahead of the expiration of a federal tax credit at the end of September.”

Waiting for inflation data

While there are good – but not perfect – private alternatives for government data on employment, retail sales, industrial production and housing, there are not good alternatives for government data on inflation. The Billion Prices Project at MIT measured inflation using data “scraped” from the internet, but it has been taken private as PriceStats; data are available only to subscribers.

Truflation publishes its US Inflation Index daily, to forecast the Consumer Price Index. It is up 2.22% year-over-year; that’s down from more than 3% at the beginning of the year but up from 1.2% in April. But because of its weighting system, Truflation’s index is not a drop-in replacement for the CPI. Fortunately, President Trump has recalled enough workers to publish the CPI on October 24, in time to calculate 2026 Social Security benefits.

No easy forecast

Trying to forecast the economy without government data is like driving a car with a windshield that is partly covered with mud. Private-sector data confirm that employment growth has slowed – due more to reduced supply (immigration) than to weakening demand – and point to a nascent slowdown in retail sales. Unless inflation data surprise to the upside, expect the Fed to cut rates at its next three meetings.   

Robert C. Fry, Jr., Ph.D.
Chief Economist, Robert Fry Economics LLC
302-743-8553
RobertFryEconomics@gmail.com,
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