Economy Watch: Debt-Ceiling Deal Possible
By Dees Stribling, Contributing Editor
As of Thursday night, no agreement about the looming debt ceiling or the shutdown of the federal government had been reached—but that didn’t stop reports of a possible short-term agreement on the most pressing of those two fiscal situations, namely the debt ceiling. Supposedly the House of Representatives is going to vote on a no-strings-attached raising of the debt ceiling before long, but one that will last only about Thanksgiving.
The drumbeat to do something about the debt ceiling, even something temporary, has been beating louder in recent days, despite the well-publicized natterings of a handful of Congressmen that default might not be the recession- or depression-producing, market-destabilizing, confidence-destroying event that virtually all economists say it would be. If the Senate and President Obama will go along with a temporary fix, little else will change over the next six weeks, and the two sides will join battle again before long.
A debt-ceiling deal wouldn’t address the shutdown, now over 10 days old. Besides the better-known impacts of the situation, such as shuttered national parks, the list of economic data that hasn’t been generated by the federal government gets longer with each day. So far, the delayed reports include last month’s employment numbers, international trade, import/export data, wholesale trade and construction spending. On Friday, the Producer Price Index, retail sales and business inventory data will join the list.
The longer the shutdown lasts, the less fresh data about the economy there will be. In the normal course of things, for instance, the Bureau of Labor Statistics would start its employment surveys for October during the week of Oct. 13. If the shutdown continues much longer that that week, it might delay or prevent the October report all together.
Initial unemployment numbers spike
A little information trickled in about jobs on Thursday, however, and it wasn’t hopeful. The U.S. Department of Labor—which receives the data from the states, and so doesn’t have to crutch the numbers itself—reported on Thursday that for the week ending Oct. 5, initial unemployment claims were 374,000, an increase of 66,000 from the previous week. The less jumpy four-week moving average was actually pretty jumpy, coming in at 325,000, an increase of 20,000 from the previous week.
Another example of the gnawing collateral damage to the economy from the shutdown was evident in Thursday’s report by travel data specialist STR about the U.S. hotel market for the week ending Oct. 5. The company found that compared with last year, occupancies nationwide declined 1.2 percentage points to 64.7 percent, while the metrics of average daily rate and revenue per available room eked out small gains year-over-year. The company attributed the soft numbers to the shutdown, and noted that the D.C. and suburban Virginia markets have suffered the most.
Despite the trickle of dour data, investors seemed thrilled that the nation might dodge the debt-ceiling bullet for now. On Thursday, the Dow Jones Industrial Average gained 323.09 points, or 2.18 percent, and the S&P 500 was also up 2.18 percent and the Nasdaq advanced 2.26 percent. On Friday morning in Asia, stocks were also headed upward.