UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Not employment report Friday'
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Oct 3, 2025 Today’s market dynamics are clouded by a US government shutdown, which hides crucial employment data. This situation complicates understanding labor market signals, heightening concerns about the economic outlook. Paul Donovan discusses how low fear of unemployment is essential in preventing recession and critiques government estimates of shutdown costs. He also highlights that while activity might shift due to shutdowns, the real worry lies in lasting impacts from layoffs. Additionally, he touches on international market reactions, notably concerning Argentina's economic stability.
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Missing Employment Signal Harms Visibility
- The US employment report is missing due to a government shutdown, removing a key real-time labour market signal.
- That loss of data is frustrating because fear of unemployment is a crucial buffer against recession.
Shutdown Cost Estimates Can Mislead
- The Council of Economic Advisers may have overstated shutdown costs by failing to annualise, inflating dollar estimates about fourfold.
- Short-term shutdowns mainly shift activity between periods rather than creating large net losses.
Furloughs Tend To Postpone, Not Erase, Income
- Furloughed federal workers typically get back pay after a shutdown, so aggregate activity is largely postponed not lost.
- Workers smooth consumption with savings or credit during the interruption, which reduces immediate impact if back pay arrives.