Data Delays In Fed Shutdown: On Getting Over It

For those who want to speculate about future moves in asset values, (in an informed way of course) numbers are the tools of the trade. Of course, numbers are also critical for those who want to manage the risks that arise from such speculations. Where do the numbers come from?

At AllAboutAlpha it has come to our attention that there is a change underway in the sourcing of such numbers. There’s been this thing called a “government shutdown,” (anarchists hold your applause, it isn’t what it sounds like) and as a consequence, various bureaus haven’t been churning out the numbers they used to.

This is already finding use as a ready-made excuse for the Federal Reserve: ‘of course we won’t be able to taper now, we don’t have the data!’

A Guy From My ‘Hood
Whether or not we buy that, the closure of this particular data spigot can make us wonder: what will asset managers do?

One Bloomberg report early this month quoted an economist at Regions Financial Corp. who said that without the official Labor Department statistics, there would be a big void in his day (the first Friday of October), so he’d have time to “sit here and stew over the sheer stupidity of all of this.”

There are surely better uses for his time than stewing.

I remember a guy in my neighborhood when I was a kid. He could be seen with great regularity heading up the street at a respectable speed every morning at 8:50 AM. My father explained to me that his reliability was due to the 9 AM opening time for the liquor store nearest us.

Now, if that fellow were to get to his desired destination, and end up standing outside a locked door because the proprietor had failed to make it in that day: his reaction may be readily imagined. Even if he knew that there were other such stores within close range, and that those other stores were already open, this habit-driven driver might have been quite put off. This was the store where he always received this product, after all. Why the heck not now???

I would expect that some alpha seekers have suffered an analogous shock, but I doubt it has lasted long. Heck, even staid banks and their staid economists have moved their noses away from the windowpane. I doubt that the fellow from Regions Financial is still stewing.

In a Bind
What about headline writers? In the weekend (October 5-6) issue of The Wall Street Journal, there’s a headline reading as follows: “Delayed Data Put Forecasters in Bind.” That sounds uncomfortable.

The story below the headline, by Jeffrey Sparshott, Josh Mitchell, and Dan Strumpf, has a less stew-enmeshed tone. Sparshott et al. quote Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, saying that bank officials (and other interested parties as well) have a range of sources of data available within the private sector, and unaffected by the shutdown.

Automatic Data Processing, for example, provides jobs reports. The Institute for Supply Management and the Markit Group both provide PMI numbers. Heck, if you’re interested in the prices of meat, poultry, and eggs you may find that the USDA number spigot is off, but Urney Barry hasn’t closed. Perhaps more important than any of those data suppliers (with due respect) there is the Conference Board, which offers the Consumer Confidence Index, the Leading Economic Indexes, Employment Trends Index, etc.

Lacker doesn’t say that he is “in a bind,” he says rather that the delays from such sources as the U.S. Labor Department may not be a “huge impediment” to his work after all.

Of course it can be difficult to sell something that someone else is giving away, so when the government and its green-ink supplied printing presses take over a field, private sector competitors face a daunting challenge. Yet there is some reason to believe, and to hope, that the bottom line appraisals of the consequences of this shut down will include the following: government stopped offering certain numbers, and the private sector … got over it.