The US Government shutdown this week does not really seem to be impacting market performance, and historically it usually has little impact.
But the secondary impacts are that certain data is temporarily unavailable, such as the heavily watched NFP, Non-Farm payroll metric. In its absence investors are looking for clues from other sources, such as the Job Opening/Quit/Layoff rates and the ADP Employment Change.
The surprise in ADP caught the attention of many, especially without NFP to either confirm or refute the potential trend shift.
Without the contribution of Education & Health, the number would have been even worse.
A look at ADP without Health & Education.
Hard to say how the Government shut down might impact Health & Education going forward in hiring terms, but we do not believe it will be helpful.
The Federal Reserve has already declared the employment picture as a cause for concern, and there are signals beginning to emerge that justify that concern.
Construction job openings are trending in the wrong direction.
The NFIB has plenty of metrics that measure employment levels as well. One such is their small business hiring plans index.
We think this is worth keeping an eye on because it appears to be at the high end of its present channel, which is below pre-pandemic levels.
One such way to monitor it closely is to also look at the small business optimism index, would you plan to hire if you were not optimistic about the future of your business?
Next release is October 14th.
Bloomberg ran an article this week that may offer some transparency to the trajectory of that optimism index above. It suggests we are in a low-hire, low-fire employment market.
Brittle stability?
Which brings us back to those JOLTS numbers. If we go back to the beginning of ChatGPT, there is a noticable trend.
It was publically announced on Novemeber 30, 2022.
Good for the market, not so hot for Job Openings.
Looked at in a different way. On a forward P/E basis we are 5.6 turns higher since then while job openings have dropped by 40%+.
Lets hope we do not have to endure a slowing economy at the same time the above trend is in effect.
Hyper Scalers
Its impossible not to see the impact that the build out of hyper scalers have had on both the markets as well as the economy as a whole. We thought offering up a few charts would help with putting that in perspective.
US hyperscalers are about to unleash an unprecedented capex wave. From 2022–24, they’ve already spent $477 billion on data centers. But between 2025–27, that number is expected to more than double to $1.15 trillion, per Morgan Stanley. The math is staggering: global data center spend could hit $2.9 trillion through 2028, including $1.6T on chips/servers and $1.3T on infrastructure like real estate, power, and build costs. That means investment needs of over $900 billion in 2028 alone. For context, the entire S&P 500 combined spent ~$950 billion in capex in 2024. The macro impact is just as large. Economists estimate data center and power-related spending could add up to 40bp to US GDP growth between 2025–26.
Citibank has a similar view.
What does the impact look like to the overall economy though?
Who actually builds these things?
There seems to be some differing views about the impact on electricity prices due to the amount of power it takes to run them. Some have suggested this is pushing up electricity costs for the rest of us.
According to BAML, that may not be the case.
But the above is a national chart, what about looking at on a state by state basis.
The Bloomberg article this chart is from is worth a look.
https://blinks.bloomberg.com/news/stories/T3DEG9GPWD3Q
Energy costs from 2020
Then 2025
Bottom line is that an awful lot of money is being thrown into these things, lets hope they figure out the power part as well!
Dow Theory
According to Co-Pilot.
The above looks like a divergence to us.
Interesting charts
In case anyone is looking for some new names, we thought the following 2 charts might help with some suggestions.
Have a great weekend!
Best
Meraki trading team
