The fog after the shutdown will hang over the US economy for months

The longest government shutdown in US history ended last night, when Congress passed a bill quickly signed into lawTo restore government functions and resume normal activity. But a major impact will continue to be felt on MIn the coming times.

During the 43-day shutdown, key economic data was not collected and there were delays in releasing important economic indicators.

In fact, the White House now says that jobs and inflation data for October will never be released due to the shutdown.

“All economic data released will be permanently skewed, leaving our policymakers at the Fed blindsided for a critical period,” White House press secretary Carolyn Leavitt said, referring to the U.S. central bank, the Federal Reserve.

The lack of data has already cast a fog of uncertainty over the state of the US economy, meaning businesses and policymakers don’t know for sure what’s going on.

“Our view of the economy is based more on emotions than verified information,” said Carl Shamotta, chief market strategist at financial services company Corp.

He says economists and businesses were relying on private sector proxies like credit card data, satellite imagery and surveys.

Shamotta says that this fog has fallen at an important time. The US-Canada trade war has created deep uncertainty and fierce debate over whether, how and when tariffs will slow the US economy.

US President Donald Trump has said that tariffs do not cause inflation and will help, not hurt, the economy.

But economists say tariffs raise costs and create deep uncertainty that weighs on investment and hiring.

Without clear, reliable data, people may say the economy is doing just fine or that inflation is not rising because there have been no reports that contradict them.

“Ultimately, this leads to a fog of uncertainty onto which you can project anything. It’s like a Rorschach test for macroeconomic understanding,” Schmotta said, referring to the psychological test in which participants describe what they see in various inkblots.

It’s like a Rorschach test for macroeconomic understanding-Carl Shamotta

Case in point, this week, Kevin Hassett, director of the White House National Economic Council, was questioned by anchors on the financial news channel CNBC.

Hassett said he thinks inflation is moving toward the Federal Reserve’s target.

“Even though it has been rising for five consecutive months until September?” asked CNBC anchor Carl Quintanilla.

Hassett ignored this and pointed to available data from before January.

“I think if you look at it since January, there have been ups and downs and seasonal changes. But yes, the downside has been surprising. People were expecting it to pick up but it didn’t,” he said.

Tim Dew, chief US economist at SGH Macro Advisors, tweeted Hassett’s statement, saying the government has no way of knowing whether inflation has increased.

“But, but… we are not collecting data due to the government shutdown,” he tweeted.

During Trump’s first presidential term, it took about eight months for his tariffs on steel and aluminum to actually have an impact on the US economy and show up in the data.

In this period, they started imposing tariffs in March or about eight months earlier.

“We are in danger of reaching a point over the next few months where new data will come out and it will shock the market so badly that we will see a broad surge in volatility or negative consequences for the economy,” Shamotta said.

Economists warn it will take some time to get even basic data back up and running.

Oxford Economics says about two dozen major reports have been delayed. It warns that the list will continue to grow as agencies try to catch up.

And this raises at least one important policy conundrum. The Federal Reserve will have to take a decision on interest rates next month.

The Fed is currently divided over the direction of the US economy. Some members are pushing for more interest rate cuts while others are urging caution, worried that inflation could rear its head again this fall.

Nancy Vanden Houten, chief U.S. economist at Oxford Economics, wrote the Fed “is still stuck in a data fog.”

This fog will remain a shadow over the American economy for several months now. This may be the new year when economists, businesses and policymakers will have reliable data shedding light on where the economy really stands.