U.S. Government Shutdown Looms, But a Postponed NFP Could Be Exactly What Stocks Need

TradingKey - With less than three days before the start of the U.S. fiscal year 2026, Congress remains deadlocked over spending bills — bringing the first government shutdown in seven years dangerously close. While a shutdown is typically bad news for the economy, it may paradoxically offer a temporary relief to U.S. stocks: delayed jobs data, weaker private-sector readings, and a potentially more dovish Fed.

Before the new fiscal year begins on October 1, Congress must pass a funding bill to replace the expiring one. Yet both parties remain locked in a standoff over healthcare spending. 

On Friday, September 26, President Donald Trump declared:

“These people are crazy ― the Democrats. So if it has to shut down, it’ll have to shut down. But they’re the ones that are shutting down the government.”

If no agreement is reached before federal funding expires on September 30, the U.S. will face its 15th government shutdown since 1981. This would lead to artial federal agency closures, furloughs of non-essential federal workers and risk of permanent layoffs, as previously threatened by Trump.

For equity investors, the biggest concern is that the September Nonfarm Payrolls report, scheduled for October 3, could be delayed — along with the September CPI release. These reports are critical inputs for the Federal Reserve’s October meeting decision on whether to cut rates again.

Currently, the likelihood and duration of a shutdown remain uncertain. The Bureau of Labor Statistics (BLS) has not yet released an updated contingency plan. Under a March 2025 protocol, around 2,000 BLS employees would be furloughed during a shutdown, leaving only the commissioner on duty. All data collection and scheduled releases would halt — and even technical issues would go unaddressed.

The BLS warned that reduced data quality during a shutdown could affect the accuracy of future estimates.

No News = Good News?

According to Bloomberg, economists expect 50,000 net new jobs in September — consistent with the average over the past three months — with the unemployment rate holding steady at 4.3%.

However, outlooks for future job growth have dimmed. Economists now forecast average monthly nonfarm payroll gains of 71,000 from Q4 2025 through 2026, down 20,000 per month from last month’s estimate. Slower employment growth supports the case for gradual rate cuts, with expectations for 100 basis points of easing by September 2026.

Bloomberg noted that without official employment data, Fed policymakers weighing their next move may have to rely on less comprehensive private-sector indicators.

The ADP Employment Report, often seen as a precursor to the BLS nonfarm payrolls, has frequently missed expectations. In 13 out of 20 reports from January 2024 to August 2025, ADP reported lower job growth than consensus forecasts.

Other alternative metrics include JOLTS job openings and weekly initial jobless claims.Ahead of the Fed’s September rate cut, these indicators consistently pointed to a weakening labor market.

MUFG warned that if upcoming labor data surprises to the upside, it would undermine Chair Powell’s argument for further easing and force the Fed to refocus on inflation risks.

Powell has stressed there is no risk-free path forward, given rising inflation risks and growing downside pressure on employment. The August PCE report, which came in broadly in line with expectations, may ease some inflation concerns — shifting the Fed’s focus back toward labor conditions. Continued weakness would reinforce the need for rate cuts — a bullish signal for equities.

Guy LeBas, Chief Fixed Income Strategist at Janney Montgomery Scott, said government shutdowns historically hurt short-term economic growth and tend to push Treasury yields lower.

Wilmington Trust Corp expects that softening employment, rising unemployment, and weak consumer spending will outweigh any benefits from tariffs on goods — leading the Fed to deliver multiple rate cuts between late 2025 and early 2026.