The long-delayed US non-farm payroll and inflation data were released this week. However, given the distortions and cancellations of some reports caused by the government shutdown, these figures are unlikely to provide clear guidance for policy adjustments in 2026...
Although investors are eagerly awaiting the release of long-delayed data this week, they may need to wait even longer to gain a clear understanding of the true state of the U.S. economy.
Two reports on employment and inflation issued by the Bureau of Labor Statistics (BLS) will serve as the best reference for economic trends in months—after a record government shutdown disrupted regular data releases. However, analysts warn that these belated statistics are already skewed and can only partially reflect the health of the world’s largest economy.
“We are still in a fog, and the upcoming data is better than nothing,” said Diane Swonk, chief economist at KPMG US. “But it won’t provide definitive answers because it reflects a constantly changing economy, and the data itself remains incomplete.”
Last week, the Federal Reserve voted to cut interest rates to a three-year low following a highly divisive meeting, exposing deep rifts within the central bank over whether to prioritize addressing a weak labor market or gradually rising inflation.
The unprecedented government shutdown that ended last month has exacerbated this uncertainty. Federal statistical agencies suspended data collection during the shutdown, delaying some key reports while others were canceled outright, leaving policymakers struggling to get a full picture of the economy.
Federal Reserve Chair Powell said last week that current borrowing costs are “broadly within the range of estimates for the neutral rate,” and whether to cut rates further next year will depend on incoming data.
“We are well prepared to wait and see how the economy evolves,” he said.
The employment data released on Tuesday will cover November as well as part of October. The Consumer Price Index (CPI) report, released on Thursday, will include only November data, as the October report has been canceled.
“The upcoming employment and inflation data are both likely to be biased, preventing us from obtaining a clear interpretation—this is due to both the impact of the shutdown itself and the various methodological adjustments that had to be made,” said Frances Donald, chief economist at Royal Bank of Canada.
“Therefore, drawing significant conclusions or insights from the October, November, or December data will be extremely challenging,” Donald added.
Against a backdrop of scarce data, the Federal Reserve is showing clear divisions over the extent and pace of interest rate cuts, particularly regarding employment data, which could have a significant impact on the trajectory of its interest rate policy next year.
"Weak data performance will confirm a softening trend in the labor market, which markets and Fed officials may project into next year," said Citi's Chief Economist Andrew Hollenhorst. "On the other hand, if the data proves strong, recent weakness might be seen as a temporary seasonal fluctuation."
However, Hollenhorst added that inflation data 'will be less complete and harder to interpret than the jobs report.' There are also divisions within the Fed over how much new tariffs could push up prices in the coming months.
"It may not be until the release of December's data in January next year that we can confidently assess whether inflation is returning to target levels or remaining elevated," he said.
Editor /rice