USD flows: Shutdown politics and economic data
The US government is now in a partial shutdown which is expected to be resolved fairly soon, but probably only for two weeks. The December JOLTS report on labor turnover due on Tuesday February 3 may be delayed, but initial claims on Thursday February 5 and the key January non-farm payroll on Friday February 6 look more likely than not to be released on schedule.
In terms of economic data, Labor Dep’t releases, which include CPI (due on February 11) and PPI (not due until February 27) are threatened by the partial shutdown, but Commerce Dep’t releases, which include GDP (Q4 data is due on February 20) are not, with the Commerce Dep’t already fully funded.
The Senate has passed a plan to avert the shutdown, backed by President Trump, which funds all government departments though Homeland Security would receive only two weeks of funding while lawmakers attempt to come up with regulations for the conduct of immigration control conducted by ICE. This now has to be passed by the House. Majority leader Johnson may try to pass it with the votes of Republicans only, where he has minimal scope for defections, with many Democrats unwilling to fund ICE at current levels even for two weeks. It looks likely that he will be able to pass it, either with nearly all Republicans or with the help of some Democrats, though that may not be achieved until Tuesday.
Even if the government reopens it may only be for two weeks, with the Democrats, feeling that public opinion is on their side, taking a hard line in demanding reforms to ICE. A recent special election for a House seat in Texas saw the Democrats overturn what had been a solid Republican majority. We may see payroll and CPI data for January as scheduled, but a fresh shutdown in two weeks could delay February’s releases.