Private Client Group

October 6th, 2025

Government Shutdown, Supreme Court Backs Fed, Data Shows Job Slump

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In today’s Steady Investor, we are taking a deeper dive into key market factors that we believe investors should keep an eye on:

The U.S. Government Shuts Down. What That Means for the Economy and Markets – The U.S. government officially entered a shutdown this week, after lawmakers failed to pass a stopgap spending bill before the September 30 deadline. Investors may take this impasse as bad news for markets and the economy, but history shows shutdowns are far more headline-grabbing and political posturing than they are economically significant.

To be fair, the impact is not zero. Some government business operations like loan approvals, permit issuances, or defense contracting get delayed. Economic data releases from agencies like the Bureau of Labor Statistics may be paused or delayed. National parks may experience closures.Some major banks estimate that the shutdown could shave 0.15% – 0.2% off GDP per week, but much of that is typically recovered once the government reopens and workers receive back pay. The CBO found the longest shutdown on record, in late 2018 and early 2019, reduced GDP by just -0.02% for the full year.

Meanwhile, many core economic activities, like Social Security payments, air traffic control, and Federal Reserve functions, continue unaffected.For their part, markets have also shown time and again that shutdowns are not catalysts for sustained downturns. Stocks often wobble in the run-up to a closure but tend to rise during and after. The private sector drives over 90% of U.S. economic activity, and equity markets are focused on forward-looking conditions.1

Retiring in Today’s Market? Make Sure Your Plan Can Withstand What’s Next
 
Markets are in transition, the Fed is cutting short-term rates, long-term yields are climbing, and inflation remains a risk. For soon-to-be retirees, these shifts can create uncertainty about how to protect savings and generate reliable income.

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The Supreme Court Weighs in On Fed Independence – This week, the U.S. Supreme Court temporarily blocked the effort to fire Federal Reserve Governor Lisa Cook, preserving her position at least through January (when the Court will hear the case in full). While the high court did not rule on the underlying legal question, its move added some clarity to the question of Fed independence.The issue centers on whether the president has the unilateral power to remove Fed governors “for cause,” a vague standard that dates back to the Federal Reserve Act of 1935.

While the Court’s decision this week was brief, just two sentences, it carries weight. It distinguishes the Fed from other agencies, and signals that the Fed’s quasi-independent status may deserve unique legal consideration. From an investor’s standpoint, the implications are more about precedent and perception than immediate policy. Central bank independence, long considered a cornerstone of monetary credibility, has no explicit constitutional protection. It instead rests on narrow statutory language, Senate confirmation norms, and the market’s faith in apolitical monetary oversight. Undermining this balance risks injecting more volatility into interest-rate expectations and long-term bond markets, especially if political pressure begins influencing future rate decisions.

The Court’s decision, for now, should reinforce the guardrails. Investors should stay tuned in early 2026, when the Court takes up the full case.3

Private Data Shows Further Cracks in the Labor Market – With the government shutdown likely putting a freeze on official jobs data, all eyes turned to private payroll processor ADP this week. And the report looked bleak.

ADP’s September employment report showed a 32,000-job decline, the steepest drop since early 2023. It also revised August’s initial gain of 54,000 to a small loss. Still, a few details are worth noting. Big companies (500+ employees) added 33,000 jobs. Small businesses (under 50 employees) lost 40,000. That divergence isn’t new, but it is widening. Higher interest rates, stickier costs, tariffs, and tighter credit conditions have been weighing more heavily on smaller firms, which lack the cushion and pricing power of larger corporations.

As long as tariffs remain the norm, we believe small businesses will continue to see disproportionate impact. Another key takeaway from ADP’s report was that wage growth continued apace, rising 4.5% year-over-year for all workers and 6.6% for those switching jobs. This is a historically strong figure. In our view, income growth matters more than job growth for gauging consumer spending’s staying power. And that spending, in turn, is a core engine of U.S. economic growth.4

Your Retirement Checklist­­­­­ Built for Today’s Market – The Fed’s recent rate cuts, higher long-term yields, and lingering inflation can reshape retirement income and portfolio risk in ways many investors overlook.

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Disclosure

1 Wall Street Journal. October 1, 2025. https://www.wsj.com/politics/policy/how-government-shutdowns-affect-the-economy-94446606?mod=economy_lead_pos2

2 Zacks Investment Management reserves the right to amend the terms or rescind the free How the Looking to Retire Soon? Here are 4 Things to Consider First offer at any time and for any reason at its discretion.

3 Wall Street Journal. October 1, 2025. https://www.wsj.com/politics/policy/the-supreme-court-just-became-the-last-line-of-defense-for-fed-independence-4b8d18e9?mod=djemMoneyBeat_us

4 CNBC. October 1, 2025. https://www.cnbc.com/2025/10/01/private-payrolls-declined-in-september-by-32000-in-key-adp-report-coming-amid-shutdown-data-blackout.html

5 Zacks Investment Management reserves the right to amend the terms or rescind the free How the Looking to Retire Soon? Here are 4 Things to Consider First offer at any time and for any reason at its discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.
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