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By Jason Stipp and Robert Johnson, CFA | 10-09-2013 11:00 AM

Bite From Shutdown Still to Come

Many of the effects from the shutdown haven't even touched the economy yet, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar.

With the government shut down, so has the flow of government data, economic data. But it doesn't mean we can't say anything about the economy right now. Here to offer his insights on what we do know based on some recent [private-sector] data is Morningstar's Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: There is some data that you can look at. You are still coming to work over the last week. But before we talk about some of the data that we do have, let's first talk about the data that we don't have, and how that's especially a big problem for the Fed right now.

Johnson: In all of their statements, the big thing that [the Federal Reserve] said is, this is data driven--we'll take it as it comes, and we'll get the data, and we'll react to it, and that's how we're going to decide when to taper our bond purchases. And we're especially going to watch the unemployment rate, and we're especially going to watch some of the job market data.

Well, lo and behold, that's some of the data where the holes are going to be the biggest [due to the shutdown].

Stipp: Essentially what they want to do is, if they see signs of economic improvement, they may begin to taper a little bit sooner. They'd recently decided that they weren't going to taper, even though we thought they were for a long time.

Do you think that given the fact we won't be seeing that data probably means status quo on their current bond-buying purchases, at least for the short term?

Johnson: I think they can't do anything but that. I think the … outside data isn't particularly good or particularly bad, and I think that they'll probably have to hold steady until we resolve this thing, and then hope that the data they do get is halfway decent.

Stipp: Let's talk about the job report, because that's a big, important one, as you said, that they are looking at, and we didn't get the job report because of the shutdown last week. Will we get that data eventually, and how might we get it when we do?

Johnson: There are a couple of things that could happen. Some of the actual survey data for the establishment report may come in, but they may have difficulty processing it. I don't know exactly what days it got mailed out, and so it's not entirely a collection issue. They may just not have sent the stuff out at the same time as usual, and that will confuse some of the data.

The bigger problem is the unemployment rate, which is the thing that the government said they really wanted to watch, because that's done by a survey, which asks, what were you doing yesterday, or what were you doing last week? And it's [asking about] something in the very visible past: Are you sure you worked one day of that period between here and there, and got paid for it?

Now … they can't, obviously, do the survey. They can't make the phone call. There's nobody to make them [right now], and so they'll have to make the phone call [later] and ask, did you work two weeks ago last Tuesday or not? They're going to have to ask it for some further-back period of time, and that's certainly going to diminish the value and the comparability of the data, because remember, this number doesn't move much. It moves hundreds of thousands on a million and million base.

Stipp: The data could be fuzzier.

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