What secrets are hidden in the Federal Reserve's "shadow database"?
2025-11-07 20:23:57
With the US government shutdown in 2025 already exceeding 35 days, setting a new record for the longest in history, the lack of federal economic data is testing the Federal Reserve's policy-making. Key indicators such as the monthly non-farm payroll report and the Consumer Price Index (CPI) have been interrupted: non-farm payroll data has been missing for two months, the CPI has been interrupted for the first time by a full cycle, and indicators such as weekly initial jobless claims may be missing for multiple cycles. These gaps make it difficult to assess the economic situation and have market participants beginning to focus on how the Federal Reserve will respond to the challenges posed by the data gap.
Federal Reserve Vice Chairman Thomas Jefferson recently stated that the Fed will proceed "slowly" on interest rate cuts given the uncertainty caused by the government shutdown. He pointed out that adopting a "meeting-by-meeting" approach is particularly prudent, given the unclear amount of official data available before the December meeting. This statement echoes the views of Fed Chairman Jerome Powell, highlighting the real impact of data gaps on monetary policy.
Following the government shutdown, agencies such as the Bureau of Labor Statistics (BLS) suspended data collection and release. The October non-farm payroll report, originally scheduled for release on November 7, was postponed again, with some even suggesting it might not be released at all. The interruption of the CPI data broke its continuity since 1913, and monthly indicators such as construction spending and manufacturing surveys were also missing. For the Federal Reserve, this is not only a data gap but also affects its decision-making basis.
The Federal Reserve is utilizing multiple alternative data sources. Before the shutdown, the Atlanta Fed's research team reviewed historical data from its corporate executive survey to verify its consistency with official indicators of employment, spending, and output. Their quarterly poll covers approximately 5,600 companies and tracks sales expectations, unit costs, and hiring intentions—indicators that correlate with official output growth. Brent Meyer, head of the Atlanta Fed's Center for Economic Surveys, stated that this approach captures overall economic trends.
Other branches of the Federal Reserve System have taken similar actions. A study by the Boston Fed used text analytics to dissect the Beige Book, attempting to extract signals of recession risks. The Chicago Fed released a model estimate of the unemployment rate, showing a slight increase to 4.4% in October. These analyses also integrated private data sources: ADP's payroll processing data showed that the private sector added 42,000 jobs in October; Revelio Labs estimated a national overall job decline of 9,000 through platforms such as LinkedIn. Federal Reserve Governor Lisa Cook noted that since the pandemic, they have become accustomed to looking for signs of a slowdown in employment from job postings and real-time data.
In his speech, Vice Chairman Jefferson confirmed that policymakers do indeed have access to information from the Federal Reserve's own economic monitoring, state government records, and privately collected data. He stated that this information indicates "the overall economic situation in the United States has not changed much over the past few months," the labor market is "gradually cooling," and inflation is "similar to levels seen a year ago."
Technological innovation provides additional support. While the database built by online price tracking company PriceStats cannot completely replace the CPI, it offers directional guidance. Artificial intelligence models are used to analyze corporate financial reports and uncover price signals in the service sector, while mobile tracking and big data depict consumption and mobility trends. Harvard professor Alberto Cavallo points out that these tools are sufficient to provide direction. Furthermore, Beige Book-style corporate interviews fill data gaps, providing immediate insights during periods of rapid policy change.
Despite the record-long shutdown that could drag down GDP by 0.1-0.2 percentage points weekly, the situation has taken a turn for the better. Positive signs have emerged from bipartisan negotiations in Congress, with the government expected to reopen this month, possibly by mid-November. If this happens, it will alleviate pressure on sectors such as tourism and air travel restrictions.
After reopening, the release of supplementary data will become a focal point. Looking back at the 2018-2019 shutdown, the BLS released the delayed non-farm payroll report upon reopening, essentially releasing data from multiple months at once. The brief shutdown in 2021 also did not result in significant omissions, with officials prioritizing catching up on core indicators such as employment and inflation. However, the scale of the 2025 data release—two consecutive months of missing non-farm payroll data—makes the path to a supplementary report more uncertain.
If the non-farm payroll data for October and November are released all at once at the end of November, coupled with the completion of the CPI cycle, it could influence market expectations for the Federal Reserve's policy. If these data show strong employment or persistent inflation, it could prompt the Fed to pause interest rate cuts; if they show signs of recession, it could strengthen expectations of rate cuts.
However, a delayed release is not certain. The Labor Department has hinted that the October jobs report may not be released due to the data collection window closing. Weekly initial jobless claims data is more prone to missing multiple periods because it relies on real-time state-level reports, making reconstruction more difficult. While the possibility is small, if it does occur, the Federal Reserve will rely more heavily on private data, and its policy shift may be more cautious.
For traders, the Fed's backup plans are not only emergency measures but also provide long-term guidance. In the short term, attention can be paid to the Atlanta Fed's GDPNow model and the Chicago Fed's unemployment rate estimate to anticipate the tone of the December meeting. Jefferson's remarks indicate that the Fed will remain cautious in the face of data uncertainty, providing important guidance for the market.
In the medium term, if the release of supplementary data triggers a concentrated release of information, market volatility may increase. In the long term, this shutdown has accelerated the Federal Reserve's use of alternative data. The integration of AI and private sources may make policy more flexible, but it also increases the risk of bias. In the context of the global economy, the Fed's "unofficial readings" may more frequently affect emerging markets and commodity chains, and traders need to pay attention to these alternative indicators.
The government shutdown highlighted the Federal Reserve's adaptability. Regardless of when the shutdown resumes, traders can use these alternative data sources to more comprehensively assess the potential policy direction. Periods of data scarcity may present an opportunity for the market to expand its analytical dimensions.
Federal Reserve Vice Chairman Thomas Jefferson recently stated that the Fed will proceed "slowly" on interest rate cuts given the uncertainty caused by the government shutdown. He pointed out that adopting a "meeting-by-meeting" approach is particularly prudent, given the unclear amount of official data available before the December meeting. This statement echoes the views of Fed Chairman Jerome Powell, highlighting the real impact of data gaps on monetary policy.
Responses to Data Shortages: From Official Channels to Alternative Sources
Following the government shutdown, agencies such as the Bureau of Labor Statistics (BLS) suspended data collection and release. The October non-farm payroll report, originally scheduled for release on November 7, was postponed again, with some even suggesting it might not be released at all. The interruption of the CPI data broke its continuity since 1913, and monthly indicators such as construction spending and manufacturing surveys were also missing. For the Federal Reserve, this is not only a data gap but also affects its decision-making basis.
The Federal Reserve is utilizing multiple alternative data sources. Before the shutdown, the Atlanta Fed's research team reviewed historical data from its corporate executive survey to verify its consistency with official indicators of employment, spending, and output. Their quarterly poll covers approximately 5,600 companies and tracks sales expectations, unit costs, and hiring intentions—indicators that correlate with official output growth. Brent Meyer, head of the Atlanta Fed's Center for Economic Surveys, stated that this approach captures overall economic trends.
Other branches of the Federal Reserve System have taken similar actions. A study by the Boston Fed used text analytics to dissect the Beige Book, attempting to extract signals of recession risks. The Chicago Fed released a model estimate of the unemployment rate, showing a slight increase to 4.4% in October. These analyses also integrated private data sources: ADP's payroll processing data showed that the private sector added 42,000 jobs in October; Revelio Labs estimated a national overall job decline of 9,000 through platforms such as LinkedIn. Federal Reserve Governor Lisa Cook noted that since the pandemic, they have become accustomed to looking for signs of a slowdown in employment from job postings and real-time data.
In his speech, Vice Chairman Jefferson confirmed that policymakers do indeed have access to information from the Federal Reserve's own economic monitoring, state government records, and privately collected data. He stated that this information indicates "the overall economic situation in the United States has not changed much over the past few months," the labor market is "gradually cooling," and inflation is "similar to levels seen a year ago."
Technological innovation provides additional support. While the database built by online price tracking company PriceStats cannot completely replace the CPI, it offers directional guidance. Artificial intelligence models are used to analyze corporate financial reports and uncover price signals in the service sector, while mobile tracking and big data depict consumption and mobility trends. Harvard professor Alberto Cavallo points out that these tools are sufficient to provide direction. Furthermore, Beige Book-style corporate interviews fill data gaps, providing immediate insights during periods of rapid policy change.
Possibility of a turnaround: Uncertainties surrounding the expected reopening and the release of supplementary data.
Despite the record-long shutdown that could drag down GDP by 0.1-0.2 percentage points weekly, the situation has taken a turn for the better. Positive signs have emerged from bipartisan negotiations in Congress, with the government expected to reopen this month, possibly by mid-November. If this happens, it will alleviate pressure on sectors such as tourism and air travel restrictions.
After reopening, the release of supplementary data will become a focal point. Looking back at the 2018-2019 shutdown, the BLS released the delayed non-farm payroll report upon reopening, essentially releasing data from multiple months at once. The brief shutdown in 2021 also did not result in significant omissions, with officials prioritizing catching up on core indicators such as employment and inflation. However, the scale of the 2025 data release—two consecutive months of missing non-farm payroll data—makes the path to a supplementary report more uncertain.
If the non-farm payroll data for October and November are released all at once at the end of November, coupled with the completion of the CPI cycle, it could influence market expectations for the Federal Reserve's policy. If these data show strong employment or persistent inflation, it could prompt the Fed to pause interest rate cuts; if they show signs of recession, it could strengthen expectations of rate cuts.
However, a delayed release is not certain. The Labor Department has hinted that the October jobs report may not be released due to the data collection window closing. Weekly initial jobless claims data is more prone to missing multiple periods because it relies on real-time state-level reports, making reconstruction more difficult. While the possibility is small, if it does occur, the Federal Reserve will rely more heavily on private data, and its policy shift may be more cautious.
Traders' focus: Market impact from a long-term perspective
For traders, the Fed's backup plans are not only emergency measures but also provide long-term guidance. In the short term, attention can be paid to the Atlanta Fed's GDPNow model and the Chicago Fed's unemployment rate estimate to anticipate the tone of the December meeting. Jefferson's remarks indicate that the Fed will remain cautious in the face of data uncertainty, providing important guidance for the market.
In the medium term, if the release of supplementary data triggers a concentrated release of information, market volatility may increase. In the long term, this shutdown has accelerated the Federal Reserve's use of alternative data. The integration of AI and private sources may make policy more flexible, but it also increases the risk of bias. In the context of the global economy, the Fed's "unofficial readings" may more frequently affect emerging markets and commodity chains, and traders need to pay attention to these alternative indicators.
The government shutdown highlighted the Federal Reserve's adaptability. Regardless of when the shutdown resumes, traders can use these alternative data sources to more comprehensively assess the potential policy direction. Periods of data scarcity may present an opportunity for the market to expand its analytical dimensions.
- Risk Warning and Disclaimer
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