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ADP and More Shutdown Notes ?4

17:10 01-Oct-25

FedWatch didn't budge as trading progressed, and part of the reason may be that the SCotUS has effectively denied the White House request for expedited removal of Fed Governor Cook by scheduling oral arguments on the case for January.

American equity futures were negative from the start this morning, perhaps because others did not anticipate federal shutdown as this service did.  More likely, now that it is here, market pundits are recalling that Trump presided over the longest shutdown in history during his last term, and it is indeed the length of disruption that will determine the level of economic impact.

The most immediate effect is that we won't be getting a BLS employment report on Friday morning after all, since that agency will be maintaining just one employee according to the government contingency plan. This service has always seen ADP as a better source of data anyway, but this morning's report offers little comfort with a -32K decline when +40K or more was expected.  The prior month was also revised to a loss, but the most telling figure is the half percent decline in pay gains for job changers.  Losses were focused in the Midwest and small to medium businesses.

The market had already seen a 90%+ chance of another quarter Fed cut on October 29th, and now views it as a 99% certainty.  We'd need to see more bets on a half point cut for this to buoy indexes, and currencies also aren't showing a strong reaction.

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