U.S. Government Shutdown

    The U.S. government is now on shutdown because the Democrats and Republicans could not agree on a budget. According to the article "Federal Shutdowns Usually Don't Do Much Economic Damage. There Are Reasons to Worry About This One," this shutdown looks riskier than all the other one's and President Donald Trump is threatening to permanently eliminate thousands of government jobs. The U.S. government has been shut down 21 times in the past half century, and the last shutdown stretched about five weeks. During a shut down, Federal workers do not get paid and the federal government delays some spending. When the shut downs are over, federal workers go back to their jobs and collect back pay. Government benefit payments and healthcare programs (Social Security and Medicare) won’t be disrupted by the shutdown, which is a crucial income support for some families. However, there is little evidence that they have a significant impact on the economy since it is not for a long period of time. 

    There is an estimate that the shutdown and loss of income for federal workers could decrease the nation's annual growth rate 0.1 to 0.2% in the fourth quarter for each week the government is closed. The economy created 911,000 fewer jobs than originally reported in the year, which meant that employers added an average of fewer than 71,000 new jobs a month over that period. Since March, job creation has been slowing down even more, which shows an average of 53,000 jobs a month. The GDP growth is at a 3.8% annual pace from April through June, but drops to 0.6% in the first three months of the year. 

Press, Associated. “Federal Shutdowns Usually Don’t Do Much Economic Damage. There Are Reasons to Worry  about This One.” US News & World Report, U.S. News & World Report, 2025,   www.usnews.com/news/business/articles/2025-10-02/federal-shutdowns-usually-dont-do-much-economic-damage-there-are-reasons-to-worry-about-this-one.

The State of U.S. Trade

Right now, U.S. trade policy is shaking things at home and abroad. The government has been raising tariffs on countries like China, Canada, and Mexico, arguing it is about protecting American industries. But higher tariffs often mean higher costs for businesses and, eventually, for consumers. Even agriculture is being affected soybean farmers for example are struggling after China pulled back on imports.

At the same time, the U.S. is trying to manage relations with Europe. A new agreement with the EU capped many tariffs at 15%, which helped avoid a bigger trade war. Still, the mix of protectionism and negotiation shows how trade policy is now being used as much for politics and strategy as for economics. For Americans, these choices matter because they influence prices, jobs, and how stable global supply chains remain.

Stock futures are lower as government shutdown looms

     U.S. stock futures edged lower Tuesday night as Wall Street braced for a likely government shutdown at midnight, with Dow futures slipping 68 points and S&P 500 and Nasdaq 100 futures both down more than 0.2%. Congress will suspend around federal workers and delay critical economic data like Friday’s jobs report, which has added to investor worries about inflation, slowing hiring, and higher stock valuations. Markets ended September on a high note, with the S&P 500 gaining 7.8% in the third quarter, and history shows stocks often climb during shutdowns. After hours, Nike jumped 4% on stronger-than-expected sales, while Lithium Americas surged 34% after the U.S. government announced a 5% stake in the Canadian miner and its Thacker Pass lithium project. The stock market typically gains during a government shutdown, so it wouldnt be a bad idea to look into stocks

Stock market today: Live updates

The resilient stock market may be keeping the economy out of a recession. Why that’s a bad thing

 The stock market going up is making a lot of people feel richer, which has led them to spend more money on things like new houses, cars, and other expensive items. This extra spending is giving the economy a big boost. Reports show that consumer spending has gone up, housing sales have hit new highs, and even company profits are stronger than people expected. All of this makes the economy look stable and healthy, even though job growth has been slow and inflation is still higher than the Federal Reserve’s target. The stock market is allowing the economy to keep up and prevent falling into a recession.

The downside is that this growth isn’t really spread across everyone. Most of the stock gains are helping the richest people, since they own nearly all of the stock market. Regular people who don’t have much invested aren’t feeling the same benefits, and their confidence about the economy has actually been going down. Also the stock market is currently very expensive compared to its past values, which means it could be due for a drop. If that happens, wealthy people may pull back on their spending and the job market wouldn’t be able to pick up the slack. That’s why the economy seems strong on the surface, but it’s really fragile. If the stock market falls, the whole thing could tip into a recession.

https://www.cnbc.com/2025/09/27/wealth-effect-stock-market-recession.html 

Economy Government shutdowns usually have little economic impact. This time could be different

 Government shutdowns usually don’t hurt the economy much. Markets often bounce back, and growth tends to lose only about 0.1 percentage point of GDP per week, even in a long, 35-day shutdown. But this round could be different because there’s a public threat to make some furloughs permanent. That would hit the job market, especially in the D.C. area, and add new uncertainty. Analysts at Barclays and Nomura warn that permanent cuts would be a sharp break from past practice. NerdWallet notes that even a short gap in pay can push families into money trouble.

There’s also a data problem. If the Labor Department closes, the Bureau of Labor Statistics will delay key reports like jobs and inflation, and quality could slip. That means Social Security cost-of-living updates could be affected, and the Federal Reserve might have to lean on private data when making rate decisions. We’ve seen delays before, like in 2013, and Bank of America still expects the overall economic impact to be mild. The big risks this time are permanent job losses and a data blackout that clouds decision-making.

Source :  

https://www.cnbc.com/2025/09/29/government-shutdowns-usually-have-little-economic-impact-this-time-could-be-different.html

Federal Reserve's Recent Rate Cut: Balancing Inflation and Employment Risks

On September 17, 2025, the Federal Reserve made its first interest rate cut of the year, reducing the federal funds rate by 0.25 percentage points to a range of 4.00%–4.25%. This decision marks a shift in the Fed's approach, influenced by emerging concerns over a weakening labor market and persistent inflation.

Federal Reserve Bank of New York President John Williams emphasized that the rate cut was aimed at bolstering the job market, which has shown signs of softening. He noted that while inflation remains above the Fed's 2% target, the central bank's primary focus was to support employment without igniting runaway inflation.

Similarly, Federal Reserve Bank of Boston President Susan Collins expressed openness to further rate cuts, depending on economic data. She highlighted the need for a "modestly restrictive" policy to balance inflation control with labor market stability.

However, not all Fed officials are aligned on the path forward. Federal Reserve Governor Stephen Miran proposed a more aggressive stance, advocating for rapid and deep interest rate cuts based on assumptions about inflation and the neutral rate of interest. His approach has faced criticism for selectively interpreting economic effects and overemphasizing certain policy outcomes.

The recent rate cut reflects the Fed's cautious approach to navigating the current economic landscape. With inflation still elevated and the labor market showing signs of strain, the central bank faces the challenge of supporting employment while ensuring that inflation expectations remain anchored. As the year progresses, the Fed's decisions will continue to be closely scrutinized for signs of how it balances these competing priorities.

https://www.reuters.com/sustainability/boards-policy-regulation/feds-williams-says-cutting-rates-aimed-bolstering-job-market-2025-09-29/?utm_source=chatgpt.com

Increased Chances of Government Shutdown as Deadline Approaches

    Over the past weeks, discussion of a government shutdown has become more and more serious as time has gone. With September 30 being the last day to come to an agreement, it seems like both parties are unwilling to budge on their demands for a funding deal. 

    House Speaker, Mike Johnson, said on an interview with CNBC that Democrats "need to come to their senses and do the right thing." Referring to inability to come to a bipartisan agreement over a funding deal to keep the government in operation. 

    The Democratic party says that in order for them to agree to agree on a funding deal must include an extension of enhanced Affordable Care Act tax credits. These credits, which millions of Americans use, are set to expire at the end of 2025. Hakeem Jeffries, House Minority Leader, said on Squawk Box that "If the government shuts down, it’s their decision to do it". 

    The Republican party is acting like they are unwilling to include that at this time, but Johnson said they would be open to a conversation about the ACA at a later time. This statement came after Johnson accused the Democratic party of wanting to give undocumented immigrants federal health benefits. 

    The last time that the government shut down was during the first Trump administration in 2018-2019 that lasted 35 days. To-date it is the longest government shutdown in American history.

    It is becoming more evident that this conflict is about politics more than policy. It will be interesting to see if the government comes to an agreement to avoid a shutdown that is starting to become more imminent as the clock ticks towards midnight.

 Link to Article: https://www.cnbc.com/2025/09/30/government-shutdown-live-updates.html 

World's first nationally certified deforestation-free coffee

A groundbreaking partnership between Lavazza, the government of Ecuador, and the UNDP is making waves in the coffee world, and it’s now a finalist for the World Economic Forum’s Giving to Amplify Earth Action Awards. Together, they’ve launched the world’s first nationally certified deforestation-free coffee, creating a fully traceable supply chain that protects the Amazon while supporting over 400 smallholder farmers. Through Ecuador’s PROAmazonía program, the initiative has already restored over 15,000 hectares of land and exported 85 tons of sustainable coffee under Lavazza’s ¡Tierra! brand.

This could be a game-changer for the global coffee economy. As consumers demand more transparency and eco-conscious products, models like this one are setting a new standard for how coffee is grown and sold. Not only does it open doors for farmers in rainforest regions to access premium markets, but it also pressures larger producers to adopt more sustainable practices. With plans to expand the model to cacao, livestock, and other countries, this isn’t just about better coffee, it’s about redefining how the world does agriculture.

https://www.thenews.com.pk/latest/1347497-world-first-eco-friendly-coffee-nominated-for-award

Many Jobs at Risk in Africa as U.S. Trade Deal Expires

 The African Growth and Opportunity Act (AGOA) has been giving qualifying African nations duty-free access to U.S. markets on thousands of products since its inception in 2000 and is set to expire Tuesday. This largely threatens key export markets that have been relying heavily on the duty-free access to the U.S. markets. In countries such as Kenya and South Africa, factories in the textile and apparel sectors could be forced to cut thousands of jobs as exports become less competitive. In countries like Kenya who will be widely affected by this termination, preparation of large layoffs has already been made, and in South Africa, the tariffs alone could put an estimated 30,000 jobs at risk.

The termination of AGOA would directly affect government revenues as well as decreasing business confidence in sectors that are already small and rely heavily on exports such as Lesotho and Eswatini. The U.S. Congress is looking at a short-term one-year extension of the deal; however, the uncertainty of the situation may lead to reduced foreign investment as well as lingering economic stability in those affected by AGOA.

Past trade policy shifts have not led to many large-scale crises, however given the central role that AGOA plays in the African markets, given the prominence of exports, the loss of the deal may further weaken a previously fragile labor market

Revised GDP Data Shows 3.8% Growth but Tech Spending May be Propping it Up

Revised data from the Commerce Department puts second-quarter economic growth at 3.8%. This could potentially complicate the Fed's decisions as they tend to cut interest rates when the economy is struggling, but data shows that it actually isn't. The 3.8% increase was higher than the most recent estimate of 3.3% and is actually the strongest reading since the third quarter of 2024. It shows actually that the U.S. economy is resilient, even in the face of unemployment concerns and inflation.

The revision reflected stronger growth in consumer spending, from 1.6% to 2.5%, even with consumers seeming not too optimistic about spending. Data shows that despite their pessimism regarding spending, their willingness to spend actually hasn't changed.

Meanwhile, despite the Fed's prediction that unemployment would climb from 4.3% to 4.5%, the latest data actually doesn't support this, it instead alleviates some worries about further deterioration in the job market. This suggests that the economy is doing just fine even though there's a slowdown in employment growth.

But this doesn't actually mean the U.S. economy is in the best state as the second quarter reflects the three months ending June 30. The growth picture has changed since then. A slowing labor market combined with Trump's combination of aggressive tariffs and immigration enforcement has generated concern about little growth. Even with consumer spending remaining resilient, there's a concern that lower and middle income families are being squeezed as upper income consumers continue to spend, so the resilience in consumer spending doesn't really describe lower and middle income consumers. It also really could just be that ahead of tariff, households imported more (so consumed more) to avoid them.

With regards to concerns about the job market, the Fed cut interest rates to boost economic growth, but Thursday's positive economic data complicates the situation because there seems like there may be less of a need for lower interest rates to stimulate growth. But even this thinking could be problematic because GDP growth could be extremely uneven. 

There's concerns that tech companies' spending on AI is single-handedly propping up the economy especially because federal spending cuts and uncertainty regarding tariffs have clouded sentiment elsewhere. The problem with this though is that it makes GDP growth uneven and uncertain. Some people have even suggested that without tech-related spending, the U.S. would be in a recession this year. 

The U.S. really needs other sources of GDP growth as well.

Source: https://www.nbcnews.com/business/economy/us-gdp-second-quarter-consumers-buying-rcna233692