Episode summary
Shutdown Blurs US Macro Picture
Bloomberg Surveillance
· · Guests: Jennifer Lee
Summary
Jennifer Lee, senior economist at BMO Capital Markets, said the federal government shutdown is making the U.S. macro picture harder to read and could itself tilt the Federal Reserve toward another 25-basis-point cut in December. She argued that with 50,000 furloughed workers, delayed benefits, and weaker data visibility, the shutdown adds uncertainty that may warrant easier policy, especially if the labor market softens further.
Lee said BMO has not yet changed its fourth-quarter growth forecast, but is close to doing so, expecting slower growth in late 2025 and some rebound in the first half of 2026 once the government reopens. She said the underlying job market still looks resilient enough to support consumer spending and earnings, even though hiring has slowed. Because the usual government labor report may not arrive Friday, she said investors should lean more heavily on private indicators such as the Conference Board and ADP data.
She also said trade remains a major risk, especially for Canada, where 85% of exports go to the U.S. and 65% of imports come from the U.S. While recent U.S.-Asia trade deals and a 365-day pause in U.S.-China tensions are encouraging, she said tariffs and trade uncertainty are still unsettling.
Key takeaways
- Lee said the shutdown itself increases uncertainty enough that it could support another Fed rate cut in December.
- BMO expects steady but slower U.S. growth in the fourth quarter and a partial rebound in the first half of 2026.
- Lee said corporate earnings are still holding up because the job market has not shown a major drop-off yet.
- Without the official jobs report, Lee said investors should rely more on Conference Board and ADP data to track labor trends.
- Lee said Canada remains highly exposed to U.S. trade policy because 85% of its exports go to the U.S.
Notable quotes
“We are still looking for a Fed rate, cuts another 25 beats in in December”
“it's almost like you would it would almost be another cause for cutting rates just because there is just so much uncertainty”
“we haven't actually touched our fourth quarter growth forecast just yet, but we are I think we're on the precipice of doing so”
“So far they're holding up”
How the episode opens
I really. Okay. So I have to admit, I sort of I rolled when I heard your policy of is lying, but it's very, very accurate.
You know, he said, what do you do when you're driving in a fog and you slow things down and you tap on the brakes a little bit and that's what they are doing. We are still looking for a Fed rate, cuts another 25 beats in in December. Obviously, if we are still in shutdown mode, you know, that would be it's almost like you would it would almost be another cause for cutting rates just because there is just so much uncertainty.
We have sort of 50,000 people who are furloughed and still are not getting paid. And of course, we're seeing a lot of declines in all the benefits that are being normally being paid out at this time of year. So, again, just with the lack of data, perhaps it would even suggest that we should be getting another Fed cut in December.
And Jennifer, we know that in past shutdowns, GDP has taken a hit, but then it bounces back. We gain back nearly everything we lost once the government opens up. Do you see that happening this time?
Does this time feel different? And if so, why? We are still looking for.
You know, we haven't actually touched our fourth quarter growth forecast just yet, but we are I think we're on the precipice of doing so. But, you know, I mean, just given the fact that, you know, the workers will be paid at one point, by the way, there was a question whether or not all of them will be given their back wages, but it sounds like they will be paid. So we will see that we should be seeing that bounce back.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fomc decision
- inflation expectations
- labor market weakness
- tariff impact
- rate cuts
Companies and tickers mentioned
- BMO
- BMO Capital Markets
- Brookings Institution
Watch the episode
Watch “Shutdown Blurs US Macro Picture” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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