The data dogs are howling

Overview

This episode dives into the economic implications of the government shutdown, focusing on its impact on data availability and Federal Reserve decision-making. Chicago Fed President Austan Goolsbee shares insights on inflation, interest rates, and the challenges of navigating uncertainty. Other topics include fiscal year structures, Walmart’s move to eliminate synthetic food dyes, and the role of Community Development Block Grants in local economies.

Notable Quotes

- The data dogs are howling because we're not getting our usual supply of information. — Austan Goolsbee, on the challenges posed by the government shutdown.

- People sitting on their hands does not economic activity make. — Kai Ryssdal, summarizing the cautious behavior of businesses amid uncertainty.

- Live by the refi, die by the refi. — Kai Ryssdal, on the risks of relying on refinancing during volatile mortgage rate periods.

📉 Federal Reserve Independence and Economic Uncertainty

- Austan Goolsbee emphasized the importance of the Federal Reserve’s independence in setting interest rates, despite political pressures.

- He noted that while the Fed relies heavily on Bureau of Labor Statistics (BLS) data, the Chicago Fed has developed alternative indicators to forecast unemployment during the shutdown.

- Goolsbee described the current labor market as a low hiring, low firing environment, driven by business uncertainty over tariffs and broader economic conditions.

- Inflation remains a concern, with Goolsbee expressing caution about cutting interest rates too quickly amid rising services inflation.

📊 The Impact of the Government Shutdown on Economic Data

- The government shutdown has delayed the release of critical BLS data, including the September jobs report, complicating the Fed’s ability to assess economic conditions.

- Private data sources, like the ADP National Employment Report, show job losses concentrated in small and medium-sized businesses, highlighting vulnerabilities in the labor market.

- Economists stressed the importance of comprehensive government data, which remains unmatched by private alternatives.

📆 Fiscal Year Structures Across Sectors

- Fiscal years vary widely, with the federal government starting its fiscal year on October 1st to avoid holiday disruptions.

- Private companies like Walmart and Target often end their fiscal years on January 31st to account for holiday sales and simplify financial reporting.

- Experts noted that changing fiscal year structures can have ripple effects on tax, legal, and operational processes.

🌱 Walmart’s Push to Remove Synthetic Food Dyes

- Walmart announced plans to eliminate synthetic food dyes from its private-label products by 2027, signaling a shift toward natural ingredients.

- Analysts predict this move will influence competitors and reshape supply chains, with potential price increases for natural dyes like carmine, derived from insects.

- Walmart’s scale ensures that even small changes in its product offerings have significant industry-wide impacts.

🏗️ Community Development Block Grants and Local Economies

- Community Development Block Grants (CDBGs) fund diverse projects, from infrastructure upgrades to small business advising.

- In Burlington, Vermont, CDBGs helped a nail influencer launch her business, showcasing the program’s flexibility in addressing local needs.

- Despite their effectiveness, CDBG funding has stagnated over decades, with inflation eroding its purchasing power.

- Experts described the program as vestigial, with little political momentum for expansion or modernization.