Name: On Shutdowns and Q3 Earnings | CME Group’s Market Signals
Uploaded: 2025-11-21T19:35:00Z
Duration: 5 min 5 s
Description: The government shutdown ends, and we're taking stock of its impact and gauging what companies are signaling in their Q3 earnings reports.

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The government shutdown ends, and we're taking stock of its impact and gauging what companies are signaling in their Q3 earnings reports.

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On Shutdowns and Q3 Earnings | CME Group’s Market Signals

Hello, and welcome to the "CME Group's Market Signals" where we'll discuss how the latest market moves, economic data and developing trends may impact your investments. I'm Christine Kashkari, your host from The Trust at the Wall Street Journal and Barron's, and with me today is Erik Norland, chief economist and managing director at CME Group. Erik, welcome.

Thank you so much for having me, Christine.

Thank you, Erik. You're a numbers guy, so let's start with a stat. $11 billion in economic activity permanently lost from the longest shutdown in US history, according to the Congressional Budget Office. Beyond that, quite a few economic reports from September to November have been affected: jobs reports, CPI, PPI, consumer sentiment. As someone who relies on these data to identify emerging trends in the economy and their impact on the markets, what's your take and what's your workaround?

So yeah, I mean, first there's no denying that the shutdown was enormously inconvenient for many, many people, not least of all the federal workers who weren't getting paid. I guess the good news, from an economic perspective, is that $11 billion, even though it sounds like a tremendous sum of money, in a $30 trillion economy, comes to less than 1/10 of 1%. In fact, about 3/100 of one per 100. 3/100 of 1% of GDP. So I don't think it's gonna have a big overall impact in the long term. That said, in short term, it makes life very difficult for economists because we're not getting a lot of economic data. So as a workaround, you can look at, for example, the ADP employment report instead of the usual NFP. You can look at the private sector surveys, like the University of Michigan and Conference Board Consumer Confidence Indices, as well as the ISM and S&P Purchasing Managers Indices to get a sense of where the economy is going. And sort of broadly speaking, based on those indicators, it doesn't look like economic activity delivered a tremendous number of surprises in October during the shutdown.

Does that include your expectation for jobs?

Well, yeah, you mean the ADP number actually showed negative growth in September, and then sort of mildly positive growth in October, which is consistent with our most recent readings from NFP as well as from the household survey, which gives us the unemployment rate. In the months leading up to the shutdown, it showed very, very slow levels of job creation, kind of grinding to a halt, and he sort of very slow, gradual rise in the rate of unemployment. So it looks like at the minimum, hiring is almost ground to a halt. There don't seem to be huge numbers of mass layoffs, although we are starting to get a few reports of significant layoffs occurring in the economy.

So apart from the shutdown, Erik, we're at the tail end of Q3 earning season. Overall sentiment from public companies are leaning optimistic, with widespread earnings surprise on the upside and tech and AI companies driving really positive narratives. But how do you square that with what you just mentioned earlier, in terms of massive layoffs being announced by major companies, including Verizon last week with 15,000 job cuts? What does a jobless boom portend for the economy?

Well, we've been through jobless recoveries before. For example, in the early 1990s, we had what was described at the time as the jobless recovery. In the mid 2000s, coming out of the tech wreck recession, we had what was called initially the job loss recovery. And so this is something that's fairly common when you go through productivity booms. One of the hopes for generative AI is that it dramatically increases productivity. When you increase productivity, it means you're producing more things, but with fewer hours or without necessarily increasing the number of hours worked. This is not entirely surprising given the scale of technological changes that we're beginning to see.

And what's the narrative then for non-AI companies?

Well, you know, I think it's very interesting. So in the late 1990s, everybody knew that the internet was going to be revolutionary for the economy, and it was going to tremendously boost productivity. So initially, investors flooded into the tech stocks, but ultimately, it wasn't the tech stocks in the next decade, the 2000s, that were the primary beneficiaries. Ultimately, it was small cap stocks and companies outside of the tech sectors that delivered really good performance from 2000 to 2010. So I would prepare to be surprised in terms of who the ultimate winners of this are.

Well, Erik, we'll have to leave it there. We're living in interesting times, and there's much more to discuss when we pick this back up on the next "CME Group's Market Signals."