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- A wave of earnings announcements this week will give clues about the state of the economy.
- That will be helpful amid the government shutdown, where key data reports aren’t being released.
- However, economic experts say the calls don’t replace government data.
This week, America will get an off-brand clue of how the economy is faring as earnings season heats up.
However, a trio of economists said it won’t replace key data that isn’t being published during the government shutdown.
“If the shutdown continues, private data and earnings calls offer useful clues — especially around company performance relative to expectations,” Gregory Daco, EY’s chief economist, said. “But they’re no substitute for broader and more consistent government data.”
Independent economist Aaron Terrazas said earning calls can inform people about the direction of the economy, but they are not the same as government data, and people may have to read between the lines for what’s being said.
“There’s a little bit of a guessing game around how much of this is unique to the company, how much of this is unique to the sector, how much of this is the polish and spin that inevitably accompanies talking to investors,” he said.
On the other hand, the big federal data releases tend to be more open and straightforward. Terrazas said the government has vetted and transparent methodologies for its data — people can visit the Bureau of Labor Statistics website to find a whole page on calculations.
Mark Hamrick, senior economic analyst at Bankrate, said bank CEOs are prone to saying in earnings calls that the consumer is doing well, but that has some caveats: consumers still need to buy necessities, and some are having a harder time than others. That means these calls may not capture the full picture of consumer spending.
“Earnings calls will help to give us color, ” Hamrick said, “but it doesn’t give us that fully fleshed out view that things like the CPI and the monthly employment situation read.”
A dearth of data while the government is shut down
The Bureau of Labor Statistics has mostly folded up shop during the shutdown. Data reports haven’t been released since October 1, and new data collection isn’t happening. The jobs report — arguably the most important economic data release of the month — wasn’t published on its planned date of October 3.
The Bureau of Labor Statistics said on Friday that the consumer price index inflation report will be released on October 24 instead of its originally planned date of October 15. The CPI report is especially important ahead of the Fed’s next rate decision later this month. The September data is also needed for Social Security’s annual cost-of-living adjustment.
Private data has helped fill in some of the gaps in understanding the state of the job market in September, but the findings were mixed. ADP’s analysis showed a loss of 32,000 private-sector jobs, while Revelio Labs found the US added 60,000 nonfarm jobs.
“We’re all highly reliant on information about the performance of the US economy, and the federal data is the gold standard measuring that performance,” Hamrick said.
The Bureau of Labor Statistics’ jobs report is closely watched to see how the workforce is evolving. It helps the Federal Reserve make its interest rate decisions, helps economists understand changes to the labor force, wage growth, and unemployment, and helps job seekers identify industries that are hiring more than others.
“It’s like air traffic control for the economy,” Daco said. “Planes can’t land safely without FAA staff — and businesses can’t make sound investment or hiring decisions in a data fog. Consumers, too, lose confidence.”
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