Government Shutdown Means No New Jobs Report Today—Here’s How It Could Affect the Fed and Mortgage Rates

The latest monthly jobs report was scheduled for release on Friday, but due to the ongoing federal government shutdown, it has been indefinitely delayed—depriving the Federal Reserve of crucial economic data needed to guide its next policy decisions.

Like other federal agencies, the Bureau of Labor Statistics, which puts out the jobs report on the first Friday of every month, detailing employment figures for the previous month, is currently closed.  

"At a moment when the labor market could be at an inflection point, policymakers, financial markets, businesses, and consumers are losing one of their most valuable guideposts," says Realtor.com® senior economist Jake Krimmel.  

The shutdown went into effect at 12:01 a.m. on Wednesday, after Republicans and Democrats in Congress failed to agree on a spending bill to keep the federal government funded. There is no indication at this time when the impasse will end.

For the Federal Reserve, the latest jobs report with September's employment numbers would have been a key input for the upcoming Oct. 28-29 meeting of the Federal Open Market Committee (FOMC), which sets monetary policy and weighs potential interest rate cuts.

"Consumers should care about the government employment numbers that will not come out today, because it is a large part of how policymakers determine what direction they will go when deciding about interest rates," Jessica Vance, a San Diego real estate agent and mortgage broker, tells Realtor.com.

Flying blind into the next FOMC meeting

After the FOMC approved a quarter-point reduction of the federal funds rate in September—the first in nine months—Chair Jerome Powell framed the move as a "risk management" tactic to address what he called a "challenging situation" marked by a weakening labor market and elevated inflation.

The Fed's dual mandate is to ensure maximum employment and keep inflation near 2%, yet the opposite is occurring: The labor market is softening while inflation is accelerating.

Powell stressed that the Fed's future policy was not "on a preset course" and will be informed in part by "incoming data," meaning jobs and inflation figures, which the central bank now cannot access. 

"Without fresh data, it becomes harder for the Fed to judge whether to stick or twist," notes Krimmel, echoing other economists who compared the situation to a pilot flying blind in a heavy fog.

Additionally, this data vacuum created by the shutdown is making it harder for markets to anticipate what lies ahead.

"The lack of a central data benchmark means it's more difficult to read policymakers, which in turn injects uncertainty and volatility into financial markets, and ultimately makes the Fed's job more challenging," explains the economist.

If the shutdown drags on, more data releases are at risk, including the consumer price index release from the Bureau of Labor Statistics set for Oct. 15.

Less reliable alternatives

"Until the government starts up again and the figures are released, consensus on the labor market outlook will have to be cobbled together from less familiar and noisier sources," warns Krimmel.

Those will most likely include the September ADP report on private-sector employment, which showed the economy shedding 32,000 jobs. Experts suggested taking that data with a "very heavy grain of salt."

Meanwhile, the Chicago Fed's new labor market indicators forecast the unemployment rate holding at roughly 4.3%, but tilting toward the risk of an increase. The models also show hiring rates ticking lower with job losses flat, suggesting a labor market that is cooling but not collapsing.

"If that’s right, the missing BLS report would have looked much like August: slower hiring, but not yet reflected in headline unemployment," adds Krimmel.

What does it mean for the housing market?

When it comes to housing, the lack of timely labor market data matters in three key ways, starting with the uncertainty it creates, which makes it harder for potential buyers to commit to a major purchase like a home.

"The housing market is already under pressure from high mortgage rates, 'the lock-in effect,' and weak demand," says Krimmel. "Without clarity on whether jobs are slowing further, we can’t accurately gauge the headwinds facing the market."

Secondly, while the Fed does not directly set mortgage rates, its policy decisions, which are heavily influenced by labor data, anchor the 10-year U.S. Treasury note—and mortgage rates typically follow the trajectory of Treasury yields.

Without the latest jobs numbers, it becomes more difficult to predict what the Fed will do at its next meeting: Cut the federal funds rate by another quarter of a point, opt for a larger reduction, or keep it steady.

"That ambiguity can widen spreads and inject volatility into mortgage rates at a moment when stability is needed," reminds Krimmel.

Vance, the San Diego agent, agrees.

"When things are uncertain, our markets typically do not respond well, and that can impact a buyer's bottom line negatively," she says.

Lastly, Krimmel stresses that a robust housing market depends on consumers feeling secure in their jobs and incomes, since consumer confidence mirrors the labor market.

"Even the perception that the jobs market is sputtering—especially in the absence of definitive data—can further erode already fragile housing demand," says Krimmel.

For federal employees, job security is now a pressing concern.

Typically, in a government shutdown, roughly 750,000 federal workers would be furloughed until funding resumes. 

But this time, the Trump administration seemingly looks to use the shutdown as an opportunity to carry out mass firings, with White House press secretary Karoline Leavitt saying that layoffs were "imminent." 

Krimmel says the broader risk of losing timely official data on employment is that it robs policymakers, markets, and households of a shared benchmark—the "central truth" against which all alternative data are measured.

"In its place, we lean on less consistent indicators, which raises market volatility, makes it tougher to anticipate Fed decisions, and ultimately makes it harder for policymakers themselves to steer the economy," he adds.