- The ongoing government shutdown has created a dangerous information vacuum, leaving policymakers without critical economic data
- Chicago Fed President describes the economy as showing "pretty solid" growth but warns of rising inflation in services
- Without official statistics, the Fed faces increased risk of policy missteps as it navigates economic uncertainty
Chicago Federal Reserve President Austan Goolsbee issued a stark warning Thursday about the economic consequences of the government shutdown that began October 1, saying the longer it continues, "the more blind we will be about what's going on in the economy."
The shutdown has halted the release of key economic indicators from federal agencies, creating what Goolsbee characterized as a dangerous "data blackout" that impairs the Federal Reserve's ability to set appropriate monetary policy. The absence of official statistics on inflation, employment, and growth comes at a particularly sensitive moment for the central bank, which recently cut interest rates for the first time this year.
"We're operating without the comprehensive data we normally rely on," Goolsbee told reporters after a speech in Chicago. "This creates significant challenges for a data-dependent institution like the Fed."
Despite the information gap, Goolsbee described the U.S. economy as demonstrating "pretty solid" growth with a labor market he characterized as "stable and only mildly cooling." He noted the unusual nature of the current employment situation, calling it a "low-hiring, low-firing environment."
However, the Chicago Fed president expressed particular concern about inflation trends, specifically pointing to rising prices in services sectors. He warned that the combination of persistent inflation and potential growth stagnation creates conditions that could lead to stagflation if not carefully managed.
The data vacuum comes as economists project each week of the shutdown may reduce quarterly GDP growth by 0.1 to 0.2 percentage points, with some losses potentially becoming permanent. The timing is especially problematic given recent tariff implementations on heavy trucks, lumber, and kitchen cabinets that have already contributed to inflationary pressures.
Goolsbee cautioned that if tariffs begin affecting intermediate goods—those used in production processes—the inflationary impact could expand beyond initial expectations, further complicating the Fed's policy calculations.
Market participants have grown increasingly anxious about the lack of economic visibility. "We're flying blind on the most fundamental indicators," said one portfolio manager who requested anonymity because he wasn't authorized to speak publicly. "The private data we're using as substitutes just doesn't have the same reliability or comprehensiveness."
The Fed's research staff has been forced to rely on alternative data sources and private sector indicators, but these are considered less comprehensive than the official statistics normally produced by agencies like the Bureau of Labor Statistics and Bureau of Economic Analysis.
When reached for comment, a Fed spokesperson declined to specify what alternative data sources the central bank is currently using, though people familiar with the matter said regional Fed banks have intensified their business outreach efforts to gather anecdotal information.
The political impasse over federal spending shows no immediate signs of resolution, suggesting the data blackout could persist for weeks. Goolsbee and other Fed officials have emphasized the need for caution in such an uncertain environment, with most analysts now expecting the central bank to hold interest rates steady at its next meeting rather than risk additional cuts without proper economic visibility.
Correction: An earlier version of this article misstated the timing of the Fed's most recent rate cut. It occurred earlier this year, not last month.