The U.S. government shutdown is about to end. Morgan Stanley has created a data regression timetable.

Author: Long Yue Source: Wall Street Journal

As the U.S. government shutdown nears its end, market focus is shifting from political deadlock to the release of delayed economic data and its impact on the Federal Reserve’s December interest rate decision.

According to ChaseWind Trading Desk, Morgan Stanley released a research report on November 10th, which, based on 2013 experience, predicts a timetable for key data releases. The report notes that once the government resumes operations, the postponed economic data will begin to be released gradually.

Based on the report’s calculations, if the government ends the shutdown on November 14th (Friday):

• September Employment Report: Expected around November 19th, the third business day after the shutdown ends. This will be the first major data point for the market.
• September Retail Sales and PPI: Expected around November 26th, the eighth business day after the shutdown ends.
• Q3 GDP: Expected to be released on December 5th, the fifteenth business day.
• October Employment Report: Possibly released on December 8th, the sixteenth business day (the day before the Federal Reserve meeting).

The report emphasizes that because this shutdown covered the entire October, the delay in collecting October data may be more severe than in 2013, with further postponements possible. For example, retail sales and CPI data for October might not be available until December 18th, after the Fed meeting.

The “Data Puzzle” for December Rate Cut: What Can the Fed See?

For investors, the most critical question is how much information the Fed will have at its December 9-10 meeting.

According to Morgan Stanley’s analysis, the Fed will almost certainly have access to September employment, inflation (PCE), retail sales data, and some trade and manufacturing indicators. Additionally, preliminary Q3 GDP figures and October employment reports might be released before the meeting. The report even suggests that November employment data could be released in a timely or near-timely manner.

However, decision-makers will face a significant lack of Q4 data. Aside from auto sales, official data on personal spending for Q4 will be almost absent before the meeting.

Morgan Stanley Baseline Forecast: 25 Basis Point Rate Cut in December

Despite the data delays, Morgan Stanley maintains its core view: the Fed will cut interest rates by 25 basis points at the December meeting.

The report believes that the key drivers for continued rate cuts are weakening labor demand and rising unemployment. Morgan Stanley forecasts that non-farm payrolls in September will increase by only 50,000, with the unemployment rate remaining at 4.3%; and that unemployment will rise further to 4.5% in October and November. Signs of “moderate easing” in the labor market will be sufficient to support Fed action.

Asymmetric Risks for Investors: When “Good News” Becomes “Bad News”

The report highlights the current “asymmetric risk” facing markets. Fed Chair Powell explicitly stated at the October meeting that a rate cut in December is far from a certainty, and the committee will rely more heavily on data.

This means:

• If data is weak: Since markets have already priced in rate cut expectations, expected soft data (such as slowing employment growth) will not trigger significant market volatility unless there is evidence of a sharp economic downturn (e.g., surge in layoffs).
• If data is strong: This presents the real risk. If the labor market unexpectedly accelerates (e.g., robust rebound in non-farm payrolls, unemployment rate drops), it will directly challenge the market’s consensus on rate cuts. In this case, markets will be forced to reconsider the Fed’s policy rate path, potentially leading to a re-pricing of interest rate futures and pressure on risk assets.

In summary, after the data is released, the market’s focus will be heavily on the labor market. For investors, “good news”—indicating a strong economy—may instead become “bad news” that triggers market adjustments in the coming weeks.