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Macro Economics

Sissy Yan

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Today marks the longest government shutdown in US history, surpassing the 35-day stalemate from President Trump’s first term. But while Washington has hit the snooze button, every extra day of inaction is costing the economy billions.

We’ve all heard about the immediate fallout: 42 million Americans are losing access to SNAP benefits, 

 federal employees have been furloughed or sent home without pay, and air-traffic controllers and TSA agents are bearing the brunt of reduced operations.

But the ripple effects extend far beyond airport gates.

The shutdown has cost the economy roughly 

, according to Bloomberg Economics. That’s money not flowing into paychecks, spending, or contracts: an invisible tax on growth that is taking a toll, whether you notice it or not.

It’s not just the length and the cost of this shutdown that could 

 than previous government standoffs. The US is more economically fragile than it was seven years ago, weighed down by inflation and waning confidence in the job market.

It doesn’t help that monetary policy is flying blind. With key government agencies like the Bureau of Labor Statistics offline, the Fed has lost access to official data on inflation and employment, its two biggest inputs for setting rates. That means policymakers must rely on private sector estimates instead. And in this environment, the Fed is less focused on inflation (which appears to be cooling) and more on whether the labor market is holding up.

So far, the private data offers a mixed picture. Private companies 

 in October, beating estimates and rebounding from a 29,000 drop in September, driven mostly by large firms. But the recovery remains modest: Hiring is still below the 60,000-job monthly average, and job openings have fallen to their 

About $24 billion in federal spending on goods and services has been frozen in just the first month of the shutdown, according to Bloomberg. There may be even more economic pain ahead: The Congressional Budget Office warns the impasse could shave up to 2 percentage points off fourth-quarter GDP, and if the gridlock stretches past Thanksgiving, about $14 billion could disappear for good.

With official data dark and the economy bleeding billions each week, markets are running on vibes—and it shows. The AI-fueled rally that powered much of this year is starting to lose steam as investors question how long growth and spending can hold up. Leaders at both Goldman Sachs and Morgan Stanley now expect a 

Investors may want to brace themselves—because if DC doesn’t blink soon, the market just might.

WASHINGTON, DC : The U.S. Capitol Building 

How much does the government shutdown cost the economy?

About $15 billion a week and counting.

The billion-dollar shutdown

Judy Dutton

The Fed is on a rate cut roll, notching yet another 

 to bring interest rates down to a range of 3.75% to 4.00%.

Fed Chair Jerome Powell cited a cooling labor market as the reason behind the cut. “Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low,” Powell said during the press conference. However, he did not tip his hand on whether a third cut is in the cards for December.

“At this meeting there were strongly differing views about how to proceed in December,” Powell revealed. “A further reduction in the policy rate at the December meeting is not a foregone conclusion.” Markets sank on this news.

The Fed’s latest rate cut may have not been a surprise, but it was also not unanimous. Two central bankers 

: Fed Governor Jeffrey Schmid preferred to keep rates unchanged, arguing that inflation levels had inched up and still remained well above the Fed’s 2% target. Meanwhile, newcomer Stephen Miran pushed for a half-point cut, just as he had back at his debut Fed meeting in September.

The FOMC also announced that its program of quantitative tightening would end on December 1. Back during the Covid-19 pandemic, the central bank kicked off a round of 

 to keep interest rates low and boost the economy. But in June 2022, the Fed flipped the switch and started shrinking its balance sheet, draining liquidity from the financial system.

Now, with reserves running thin, warning signs have emerged that the bank’s reserves may be 

 low, which could cause lending markets to 

 as they did in 2019. This latest decision to wind down quantitative tightening could potentially give the economy some much-needed breathing room.

 Although Fed rate cuts are only just getting started, the clock is ticking down on Powell, whose term as chair is set to expire in May. This means he has only four more FOMC meetings left before a new chair takes his place, and his replacement could be announced 

. Once JPow hangs up his hat, odds are good that President Trump will finally get his wish for more rate cuts. Whether that will hurt or help America’s economy remains to be seen.

Fed cuts interest rates twice in a row

Jerome Powell said a December rate cut is "not a foregone conclusion."

The Fed cut rates again

Like that friend who rolls into a party right as you’re clearing the Solo cups, 

 showed up late. Still, everyone was thrilled, not only because there’s so little fresh government data to dig through these days that just about 

 info is better than none, but also because the numbers looked pretty good.

Headline CPI rose 0.3% month over month, and core inflation (which excludes food and energy costs) climbed 0.2%—both one-tenth of a percentage point cooler than expected.

Annual headline inflation ticked up to 3.0% from August’s 2.9%, while core CPI eased to 3.0% from 3.1%.

This glimmer of good news was allowed to slip through the four-weeks-and-counting government shutdown after 100 BLS employees were called back to work. Their task? Release the data so that the Social Security Administration could calculate its annual cost-of-living adjustment before the November 1 deadline. Now that that duty’s done, the White House warned that October’s CPI report is unlikely to be released. That gives September’s data even more weight—a lone star on an otherwise empty stage.

What does today’s CPI news mean for markets?

September’s softer-than-expected inflation report all but guarantees that the Federal Reserve will cut rates at its next meeting on October 28–29, bringing the benchmark between 3.75 and 4%, and marking the Fed’s second consecutive cut this year. Markets cheered, sending the S&P 500 to 

But despite Wall Street’s exuberance, inflation still remains stubbornly above the Fed’s 2% target. Gasoline led the price gains in September, jumping 4.1% month over month, followed by airfare at 2.7%. Food prices rose a modest 0.2% for the month, but are up 3.1% year over year.

: The price of this supposedly “inflation-proof” fruit rose 0.4% last month and has jumped 5.4% since April, when tariffs hit banana farms in Central America. And unlike eggs, you can’t stockpile bananas, so you’re just going to have to eat those costs.

 that, although tariffs haven’t triggered massive price spikes yet, some costs are creeping up as companies that have been absorbing higher levies start passing the buck onto consumers. Plus, the longer Capitol Hill remains a ghost town, the murkier forecasts will get—until they eventually dissolve into educated guesses accompanied by a big shrug of, “Who the hell knows?”

CPI was better than expected

The inflation report was delayed by the government shutdown but turned out alright.

Inflation report arrives late, but better than expected

Lucy Brewster

We all know natural disasters such as floods, wildfires, and hurricanes are increasingly common—but what you might not realize is how much they’re hurting the economy.

Just in the first half of 2025 alone, the US saw 

 in losses from fires and storms, according to Bloomberg—a new record. A huge swath of this damage is from the brutal wildfires in Los Angeles earlier this year, which cumulatively generated roughly $40 billion in losses.

The culprit behind all of this is, of course, climate change, which is making these weather events not only more frequent, but more severe. And the devastating losses couldn’t come at a worse time: There are fewer funds than ever to help resuscitate. Just look at the Federal Emergency Management Agency’s Disaster Relief Fund, which was on the precipice of running out of money last month before a series of court battles kept it afloat.

While disasters take an enormous toll on the economy, recovering from them has become an increasingly lucrative enterprise.

The US spent an average of $80 billion per year on disaster recovery in the 1990s. In the year ending in June, the country shelled out roughly $1 trillion.

 since 2000, or about $7.7 trillion, is due to spending related to cleaning up after a natural disaster or preparing for the next one, according to Bloomberg Intelligence data.

Most of this spending goes to insurance companies, hardware stores, storage facilities, power grid equipment manufacturers, and self-storage facilities. These aren’t businesses that are necessarily marketing themselves as climate change solutions, but have functional use for preparing for and recovering from natural disasters.

: Bloomberg has put together 100 public companies related to disaster relief in its new Prepare and Repair Index, which has outperformed the S&P 500 by 6.5% per year over the past decade. And as storms only continue to get worse in the years ahead, the companies that help with the recovery will continue to profit.—

Worsening weather is costing the US trillions

Climate disasters are taking a multi-trillion dollar toll on economy

Disaster economy

Mark Reeth

Stocks rallied today as the market turned its attention to earnings and hoped that the government shutdown was nearing its finale.

Just a few months ago, all their focus was on a single story: tariffs. But after the S&P 500 plummeted the week after Liberation Day to a low on April 8, the index has soared 35%. That rally has pushed tariff fears out of investors’ minds, while a global trade war hasn’t had nearly the devastating effect on the US economy that analysts predicted.

But a pair of reports late last week made it clear that even though Americans have moved past tariffs, high levies are still going to take a big bite out of their wallets.

Last Sunday, Goldman Sachs Chief Economist Jan Hatzius wrote that his team had analyzed imports, customs duties, and consumer prices to figure out who is paying the biggest price for these new tariffs. Turns out, the average US citizen is footing over half of 

“Our analysis implies that if recently implemented and future tariffs have the same eventual impact on prices as the tariffs implemented earlier this year, then US consumers would eventually absorb 55% of tariff costs, US businesses would absorb 22%, foreign exporters would absorb 18%, and 5% would be evaded,” Hatzius wrote. “At the moment, however, US businesses are likely bearing a larger share of the costs because some tariffs have just gone into effect and it takes time to raise prices on consumers and negotiate lower import prices with foreign suppliers.”

He isn’t the only one warning that Americans will see prices rise this year. 

 from S&P Global published last Thursday noted that the company pored over forecasts from 15,000 sell-side analysts across 9,000 public companies and found that tariffs will cost companies over $1.2 trillion in lost profits.

Of course, companies aren’t going to stand idly by and eat all those losses. “Roughly two-thirds ($592 billion) of the incremental cost burden is being passed to consumers via higher prices, while one-third ($315 billion) is absorbed internally through lower earnings,” the report reads. “With real output declining, consumers are paying more for less, suggesting that this two-thirds share represents a lower bound on their true burden.”

While tariffed goods will naturally get more expensive, higher prices for some items will translate to higher inflation for all. Hatzius warned that tariffs have raised core personal consumption expenditure prices by 0.44% this year, and will push core PCE to 3% year over year by December.

And it’s not just big, publicly traded companies taking a hit from higher tariffs: Small companies that aren’t able to pass higher costs on to customers are 

In short: Tariffs are still going to do serious damage to the economy, even if they’re not front page news these days.

Americans are footing the trade war bill

US consumers will pay billions more this year thanks to tariffs.

Who pays for tariffs? You do.

The holiday hiring season has begun in earnest, but job seekers may not have a very merry Christmas.

 this morning from the Indeed Hiring Lab revealed high demand for seasonal employment: Searches for holiday jobs were 27% higher last month than in September 2024, and 50% above September 2023.

The problem is that supply isn’t keeping up. Indeed noted that postings for new positions have risen just 2.7% year over year, and only 2% of holiday job postings are urgently hiring, well below the 10% in 2021.

“In short, the pool of seasonal job postings has shrunk gradually in recent years, while job seeker interest has surged. The result is a more competitive seasonal job market with fewer opportunities for a growing supply of workers,” the report said.

The US labor market has entered a low-hiring, low-firing period of stagnation that may leave holiday job seekers empty-handed. The problem is that employers worried about the effects of tariffs have limited their hiring and firing, while employees worried about the chances of a recession have stuck with the safety of their current jobs.

Add in job losses due to AI automation, coupled with fewer low-skilled workers as immigration dries up, and you’ve got a labor market that Jerome Powell recently described as “less dynamic and somewhat softer.”

“Available evidence suggests that both layoffs and hiring remain low, and that both households' perceptions of job availability and firms' perceptions of hiring difficulty continue their downward trajectories,” the Fed chair said in a speech earlier this week.

 The government remains shut down, which means we still haven’t gotten those September employment numbers from the BLS, nor have we gotten several weeks worth of initial jobless claims reports. What data we do have doesn’t paint a pretty picture: The latest JOLTS reading revealed that job openings as a share of total employment remain near a five-year low, while payroll processor ADP noted that private employers 

Plus, the longer the government remains shut down, the more likely it is that federal employees will begin looking for new jobs, creating more competition for work—even if a judge did temporarily block the Trump administration from firing as many as 

More Americans are hunting for seasonal work at the same time that open positions have dried up, and while rising downside risks to employment mean that the Federal Reserve is more likely to 

 at its meeting later this month, that’s small consolation for Americans trying to find a job over the holidays.

Seasonal job searches are on the rise

But there may not be any holiday jobs waiting for Americans this year.

The seasonal employment struggle

Treasury Secretary Scott Bessent just gave Argentina an economic “get out of jail free” card.

Today, the US Treasury finalized a currency swap agreement 

 with Argentina’s central bank. The US has also taken the unusual step of directly purchasing Argentine pesos to boost the national currency and reduce the chaos that has recently marked Argentina’s financial markets.

The White House argues that this move is motivated by straightforward economics: If Argentina’s economy flops, it could kick off a range of economic downstream effects. But there’s an obvious political motivation: President Javier Milei is an international ally of President Trump, and he’s going to have a tough path to reelection if the economy crumbles underneath him. If Argentina is able to get back on track, it could 

 and give Trump more influence in Latin America.

Despite the size of the US government’s wager, there’s no guarantee that the bet will actually turn Argentina’s deeply dysfunctional economy around. The country has a long history of squandering financial lifelines, and has defaulted on or restructured its sovereign debt five times since 1982, according to the Washington Post.

President Milei promised to break that cycle and overhaul the economy when he was elected in 2023, but when his party lost a key vote in early September, it also lost investors’ confidence. The Argentine peso has been in freefall ever since, and has lost over 27% of its value compared to the US dollar this year. More recently, the nation’s treasury burned through $1.8 billion to unsuccessfully prop its currency up.

This isn’t Bessent’s first currency rodeo:

 All the way back in 1992, when Bessent worked for George Soros, he helped him “break” the Bank of England with steep bets against the British pound, 

 that helped Soros earn roughly $1 billion.

Now, ironically, Bessent is trying to pull off the reverse: save a plunging currency from complete collapse while fending off the 

Exchanging US dollars for Argentinian pesos