The Federal Reserve faces an unprecedented challenge as it prepares to set interest rates next week: making its decision with almost no economic data available.
The government shutdown halted the release of most U.S. economic statistics, including the monthly jobs report. Additionally, the Fed also recently lost access to one of its main private sources of supporting data.
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Payroll processing giant ADP quietly stopped sharing its internal data with the central bank in late August, leaving Fed economists without a real-time measure covering about a fifth of the country’s private workforce.
For years, this data stream has served as a real-time check on labor market conditions between monthly reports from the Bureau of Labor Statistics (BLS).
His sudden disappearance, first reported by the Wall Street Journal, could leave the Fed “flying blind,” said former Bureau of Labor Statistics Director Erica Groshen.
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Groshen told Fortune that from his experience at the BLS and with the Fed for decades, the loss of ADP data is “very concerning for monetary policy.”
The economist warned that at a time when policymakers are already navigating a fragile economy — Fed Chairman Jerome Powell has said multiple times that there is no current “risk-free path” to avoiding recession or — the data blackout increases the risk of serious errors.
“The Fed can either over-tighten or under-tighten,” Groshen said. “These actions are often taken too little and too late, but with less information, the likelihood of them being taken too little and too late would be even greater.”
Rupture after years of collaboration
Since at least 2018, ADP has provided anonymous payroll and earnings data to the Fed for free, allowing economists to construct a weekly measure of employment trends.
The partnership is well known to both Fed insiders and casual market observers.
However, according to The American Prospect, ADP suspended access shortly after Fed Director Christopher Waller cited the data in an Aug. 28 speech about the cooling job market.
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Powell has since called on ADP to restore the deal, according to The American Prospect.
ADP representatives did not respond to Fortune’s request for comment. The Fed declined to comment.
Groshen said there are several plausible reasons why ADP might have halted the collaboration.
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One possibility is that the company found a methodological problem in its data and wanted to fix it before continuing to share information used in monetary policy.
“That would actually be a responsible decision,” she told Fortune, noting that private companies have more flexibility than federal agencies but less institutional obligation to be transparent about mistakes.
Another explanation, according to Groshen, could be internal or reputational pressure. After Waller publicly mentioned the collaboration, ADP may have worried about how it looked to customers or shareholders.
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“You can imagine investors saying, ‘Why are we giving this away? The Fed has money,'” the economist said.
The company may also have wanted to avoid being seen as influencing central bank decisions, especially in a politically charged environment.
Whatever the motivation, Groshen said the episode highlights how fragile public-private data relationships remain. Without clear structures or long-term agreements, companies can withdraw at any time.
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“If policymakers build systems around data that can disappear overnight, that’s a real vulnerability for economic governance,” he said.
A data blackout at a critical time
The timing could hardly be worse. Next Thursday, the Federal Open Market Committee (Fomc, equivalent to Copom in Brazil) meets to decide whether to reduce interest rates again, after a long-awaited cut of 0.25 points in September.
With the BLS pausing most releases because of its shutdown contingency plan, official numbers on employment, unemployment and wages have been delayed — starting with the September report and possibly extending into October.
In the absence of real-time data, Fed economists are relying on a patchwork of alternatives: state unemployment claims, surveys from regional banks and anecdotal reports from business contacts.
Groshen called them “useful but incomplete,” adding that the lack of consistent statistical baselines makes monetary policy much more error-prone.
She advocated for the BLS to receive “multi-year funding” from Congress so it can remain open even during government shutdowns.
“I hope that a silver lining in all these difficulties is a realization on the part of all concerned, including Congress and the public, that our statistical system is an essential infrastructure that needs some love right now,” Groshen said.
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