Overnight we have seen some good news about the present US government shutdown.
Breaking: The Senate cleared a critical hurdle to end the record-long government shutdown, after Democrats provided enough votes to advance the spending measure. ( Wall Street Journal)
In a nicer world it would have been driven by the way that the food stamp or SNAP programme was being halted. But I rather suspect that it was this that was the driving factor.
As of 4:30 p.m. ET on Sunday, more than 2,200 flights were cancelled across the country, according to the FlightAware website, as the FAA grappled with sustained staffing issues in air traffic controller towers and centers. Some 7,500 flights also were delayed.
Saturday saw 1,521 flights canceled nationwide and more than 6,400 flights delayed. (abc News)
Senators will be fearing that Joe and Josephine six-pack will either be affected by this or will keep seeing it on their news screens and decided that was too much. That was reinforced by this on Face the Nation..
White House National Economic Council Director Kevin Hassett told @margbrennan
“Thanksgiving time is one of the hot times of the year for the economy. It’s Black Friday. If people aren’t traveling, then we really could be looking at a negative quarter for the fourth quarter,” Hassett said.
The Vampire Squid also got a mention.
“[Goldman Sachs] is estimating that we’ve already knocked about 1.5% off of GDP,” says National Economic Council Director Kevin Hassett on the Shutdown. “We have to get this government open.” (RapidResponse47)
As you can see that was really rather a panic about the state of the economy and being politicians they were worried about who was going to get the blame for it. In the short-term it will take time to get things going again although financial markets have already headed higher and as I type this the US S&P 500 is up 1% and is around 6800. That is another perspective on 2025 which is the extraordinary year that stock markets have seen. Plus it is also interesting that a move you would think would calm things has been accompanied by a 2% rise in the price of Gold with the main futures contract at US $4090,
Returning to the economy there is another measure that has been signalling a warning.
The US freight RECESSION IS DEEPENING: The US truckloads index FELL to its lowest since 2014, as fewer goods are being moved across the country. According to FreightWaves, the sector is in a goods recession, a setup that could force many small trucking firms out of business. ( GlobalMarketsInvestor)
GDP Nowcast
We can come out of the dark above and into the light via a trip to the Atlanta Federal Reserve.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 4.0 percent on November 6, unchanged from November 3 after rounding. The model was last updated after yesterday’s ISM Services PMI Report from the Institute for Supply Management, and there was little to no change in all of the GDP subcomponent forecasts relative to their values after the previous model update on November 3.
It has been around that level for a while now. If we look at the ISM report referred to we see this.
(Tempe, Arizona) — Economic activity in the services sector returned to expansion in October, say the nation’s purchasing and supply executives in the latest ISM®Services PMI® Report. The Services PMI® registered at 52.4 percent and is in expansion territory for the eighth time in 2025.
Different sectors had quite different situations.
- “Uncertainty due to the federal government shutdown has shuttered many non-essential functions. This will lead to project delays and likely hurt our overall fiscal year 2026 expectations. Our sites are funded through the next couple of months, but if the shutdown continues beyond that time, we will expect mass furloughs of our employees.” [Management of Companies & Support Services]
So the shutdown was affecting some but it seems the consumer was still spending.
- “Business very strong, no supply chain or logistical issues.” [Retail Trade]
Also we got what has been a theme about the US economy in recent years which is very different reports about the same sector as here is another look at the sector including trucking.
- “General business has been steady, with minimum fluctuation.” [Transportation & Warehousing]
So in summary we are told that the third quarter was really strong (1% GDP growth as we would express it) and according to the ISM report it was in July and August. I pit it like that because according to it Services were flat in September and manufacturing has overall been shrinking. Personally I would smooth the readings out and note that the growth recorded continued into last month.
The Labour or Labor Market
The story twists again here as in spite of recording growth the ISM Services report told us this.
The Employment Index contracted for the fifth month in a row with a reading of 48.2 percent, a 1-percentage point improvement from the 47.2 percent recorded in September.
That really poses a question if the growth being seen is associated with weaker employment. It made me wonder if we are seeing the impact of AI?
AI and employment
It looks as though the US Federal Reserve is concerned too. Here is its Vice-Chair Phillip Jefferson from Friday.
AI can allow a worker to complete tasks in moments that previously took many minutes, if not hours. That has caused many to question whether AI will lead to notable job loss. This potential disruption of labor is a real risk.
But there are also gains.
But increased productivity leads to economic growth, which may create new employment opportunities. AI is also expected to create new job categories and transform existing ones.
There is a hint of wage rises for some as an initial impact.
There has been robust competition among high-tech firms for workers who possess the skills to develop this technology……I mentioned the rising wages for certain workers with skills that complement AI.
I think we end up with him taking a long time to say he does not know.
AI could help the economy achieve higher growth through increased productivity while reducing inflationary pressures. Specifically, increased productivity could lower production costs and put downward pressure on prices.
On the other hand.
Some research has also suggested that AI is having a more detrimental effect on the job prospects of younger, less experienced workers, including recent graduates, relative to those further along in their careers.
You may note that along the way economics is yet again deserving of the description of being the “dismal science”. My home country the UK has recently been navel gazing about a lack of productivity growth. The US which may well be seeing a surge in it has pivoted to worries about job losses. It would seem that in economics Goldilocks porridge is always with too cold or too hot.
Comment
Over the past few years there have been various scares about the US going into recession only for its performance to be much better than its peers. So there is clearly an issue with economic management and statistics. There is a particularly irony in the reality that AI is creating some of the present confusion when it may well be at least a partial solution. But it confirms my view that this was a mistake.
I supported last week’s decision to reduce our policy rate by a quarter percentage point.
That was from Fed Vice-Chair Jefferson in spite of this.
Inflation is running at a rate similar to that of a year ago.
His follow-on rhetoric rather collides with the ISM report as he tells us this.
The lack of progress on headline inflation appears to be due to tariff effects, with signs that underlying inflation may be continuing to make progress to 2 percent.
And ISM
“The Prices Index registered 70 percent in October, its first time at or above that threshold since a reading of 70.7 percent in October 2022. The October figure was a 0.6-percentage point increase from September’s reading of 69.4 percent. The index has exceeded 60 percent for 11 straight months.
