How the Fed Makes Policy Decisions Without Official Data: Innovation Amid Disruption

Economic

Summary:

With the U.S. government shutdown halting official data releases ahead of its October meeting, the Federal Reserve turned to alternative datasets from business surveys to real-time digital platforms to assess the economy...

Navigating a Data Blackout: The Fed’s Policy Challenge

Two weeks before its critical policy meeting in late October 2025, the Federal Reserve faced an unprecedented obstacle: a shutdown-induced interruption in key government statistics, including jobs data and the Consumer Price Index (CPI). This disruption threatened to undermine the Fed’s ability to gauge inflationary pressures and employment trends two pillars of its dual mandate.

Instead of postponing decisions or operating blindly, the Fed leveraged a broad arsenal of alternative data sources. From online job postings and AI-powered analytics to real-time business sentiment surveys, central bank economists stitched together a proxy picture of the economy. The episode underscores a causal shift in modern monetary policymaking: when traditional inputs falter, digital innovation steps in.

Fed Atlanta’s Survey Model: Replacing Data with Sentiment

The Federal Reserve Bank of Atlanta played a central role in compensating for missing macroeconomic signals. Its team employed quarterly surveys of over 5,600 business executives, capturing real-time expectations on hiring, input costs, and demand outlooks. Historical validation revealed a strong correlation between these forward-looking views and the actual performance of metrics such as employment and inflation a year later.

Brent Meyer, vice president at the Fed Atlanta, emphasized that the process did not rely on anecdotal guesswork but on a statistically validated, structured dataset. The survey results prior to the October meeting indicated clear economic improvement in Q3 even amid signs of renewed inflation pressure guiding the Fed’s tone in deliberations.

Alternative Data Ecosystem: Real-Time and Rapid, Yet Imperfect

Beyond internal surveys, the Fed increasingly leaned on third-party digital data streams. Job market insights from platforms like Indeed closely tracked official vacancy reports. Similarly, real-time hiring data from Revelio Labs, built using LinkedIn profiles, offered timely signals on sector-specific employment shifts. Revelio estimated a net loss of 9,000 jobs in October, primarily in government and retail, though acknowledged the limitations of lacking demographic breakdowns and labor force participation rates.

Price data gaps, particularly due to the absence of CPI figures for October the first break in the dataset’s history were addressed using platforms like PriceStats, founded by Harvard professor Alberto Cavallo. However, Cavallo noted that while digital pricing can signal directionality, it lacks the comprehensiveness of CPI, especially in service sectors and housing.

Fed Boston and Chicago: Expanding Analytical Frontiers

Regional Fed branches also contributed innovative workarounds. In Boston, sentiment analysis tools were applied to the Fed’s Beige Book reports, extracting probabilistic signals of economic slowdowns or potential recession. This computational linguistics approach is not only a product of necessity but part of a broader trend of integrating AI into policy evaluation.

In Chicago, historical crosswalks between private surveys and federal indicators enabled economists to simulate likely unemployment trends and inflation trajectories an approach that grows more robust as machine learning improves pattern recognition over time.

These non-traditional approaches collectively reflect a deeper structural transition: the Fed is no longer solely dependent on slow-moving government statistics. Real-time and unstructured data now provide a complementary lens offering earlier, if noisier, warnings.

Risk of Signal Noise and Policy Overload

Fed Chair Jerome Powell acknowledged that the issue was no longer one of data scarcity but one of “noise filtering.” The central challenge lies in distinguishing actionable signals from statistical volatility in a sea of non-standard data.

This poses a risk of confirmation bias or premature conclusions, especially for complex indicators like service sector inflation, which are not easily captured by web scraping or AI models. The risk is that an overreliance on imperfect proxies could introduce new blind spots into decision-making.

Fed Governor Lisa Cook noted that since the pandemic, the central bank has significantly expanded its alternative data toolkit. But she also stressed the continued importance of human interpretation “hearing the story behind the numbers” through direct engagement with businesses, workers, and regional leaders.

Innovation Under Pressure, but No Substitute for Accuracy

The October policy meeting underscored the Federal Reserve’s adaptability in the face of informational breakdown. Its ability to pivot to alternative data ranging from AI models to direct sentiment surveys enabled it to preserve monetary credibility despite losing traditional statistical inputs.

Yet this episode also reveals structural limitations. While new tools provide speed and flexibility, they cannot fully replace the depth and reliability of standardized government datasets. As such, the Fed’s future success depends not only on integrating innovation but on rebuilding data continuity and strengthening institutional coordination during times of disruption.

The experience marks a milestone in modern central banking: a shift toward real-time, decentralized economic sensing tempered by the need for judgment, transparency, and caution.

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Gerik

Economic

Sustained Growth in Industrial Production

Vietnam’s industrial sector maintained a solid expansion in October 2025, with the Industrial Production Index (IIP) rising 2.4% from the previous month and 10.8% compared to October 2024. For the first ten months of the year, industrial production grew by 9.2%, up from 8.3% during the same period in 2024. This growth highlights an ongoing recovery in domestic industrial activity and reflects the effectiveness of structural support policies targeting output expansion.

Among key sectors, manufacturing remained the primary driver with a 10.5% increase, contributing 8.5 percentage points to the total IIP rise. Electricity production and distribution expanded by 6.8%, and the water supply and waste treatment sector rose 9%. Conversely, mining saw a slight contraction of 0.1%, continuing a multi-year decline.

Manufacturing Sub-Sectors Propel Growth

A closer look at manufacturing sub-sectors reveals several standout performers. Production of motor vehicles surged by 23.5%, followed by rubber and plastic products at 17.3%, and non-metallic mineral products at 16.8%. Metals, garments, and fabricated metal products also recorded double-digit growth, with increases of 13.8%, 13.3%, and 12.8%, respectively.

Other notable gains included food processing (10.4%), furniture and paper production (10.3% each), and wood-based goods (10.2%). The electronics and optical products segment increased by 8.2%, reflecting stable demand in high-tech manufacturing.

The pattern of expansion across these categories suggests a broad-based industrial rebound, with rising consumer demand and investment contributing to output. However, this growth appears concentrated in consumer-oriented and export-linked goods, potentially exposing it to external volatility.

Uneven Recovery: Weakness in Machinery and Energy Extraction

Despite overall strength, several sectors saw modest growth or declines. Machinery and equipment production increased by only 3.9%, while coal mining edged up 3.4%. Crude oil and natural gas extraction declined 4.1%, and natural gas output dropped 7.5%. Artificial fiber textiles and crude petroleum also posted negative growth.

These underperforming segments signal structural challenges in capital-intensive or resource-reliant industries. The continued decline in fossil fuel extraction aligns with longer-term shifts in Vietnam’s energy strategy and global demand reorientation.

Regional Contributions and Labor Trends

All 34 provinces monitored reported year-on-year IIP growth, although regional variation persists. Localities with strong gains typically benefited from robust activity in manufacturing and power generation. Others with slower growth faced headwinds in mining and low industrial diversification.

Labor figures further support the growth narrative. As of October 1, 2025, industrial enterprise employment increased by 0.8% month-on-month and 3.6% year-on-year. Foreign-invested firms led the way with a 4.1% rise in workforce size, while state-owned and private domestic enterprises reported increases of 2.6% and 2.2%, respectively.

By industry, manufacturing employment rose by 3.7%, electricity and utilities by 5.6%, and water supply and waste treatment by 1.3%. Mining employment remained flat, reflecting stagnation in that sector.

Industrial Output: Key Product Highlights

Several flagship industrial products posted significant gains over the 10-month period. Automobile production rose by a remarkable 42.2%, followed by TVs (19.6%), rolled steel (17.7%), cement and aquatic feed (both 14.6%), and casual clothing (14.3%). Other notable increases included NPK fertilizers (13.6%), leather shoes (12.8%), refined sugar (12.6%), and petroleum products (11.3%).

The strong performance of these products indicates continued recovery in both domestic consumption and export demand. Growth in processed goods and intermediate industrial inputs signals deeper value-chain expansion.

On the downside, key declines were seen in natural gas (down 7.5%), synthetic fiber fabric (down 2.3%), and crude oil (down 0.9%), reinforcing the contraction in extractive industries.

Strong Industrial Momentum with Sectoral Divergences

Vietnam’s industrial production in the first ten months of 2025 presents a picture of resilient momentum anchored in manufacturing, consumer goods, and electricity generation. This expansion, backed by rising employment and diversified product output, positions the sector as a key engine for the national economy in the face of global trade uncertainties.

However, weaknesses in resource extraction, machinery production, and selected input materials suggest uneven recovery and call for targeted policy support. To sustain this positive trajectory, Vietnam must continue boosting productivity, attracting investment into high-value industries, and diversifying away from structurally declining sectors.

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Political

Commodity

President Donald Trump ordered a federal investigation into the meatpacking industry, blaming “majority foreign owned” companies for soaring beef prices.

Trump asked the Justice Department to “immediately begin” the investigation into meat processors, accusing them of collusion, price fixing and manipulation, according to a social media post. Shares of Brazil’s JBS NV, the world’s largest meat company, fell by as much as 6.2% in after-hours trading.

“I am asking the DOJ to act expeditiously,” Trump posted Friday on social media. “Action must be taken immediately to protect Consumers, combat Illegal Monopolies, and ensure these Corporations are not criminally profiting at the expense of the American People.”

Wholesale beef prices, which have been surging in recent years, jumped 16% in 2025, according to the US Department of Agriculture. The increase came after the US cattle herd dwindled to the lowest level in seven decades, in part due to droughts.

The high cost of living dominated voter concerns this week in off-year elections, propelling Democrats to victory over Trump’s Republicans in races across the country. Polls showed voters gave Trump low ratings for his handling of the economy, and afterward his advisers vowed to place a greater focus on affordability.

Meat is the latest target in Trump’s attempts to curb food inflation, with the cost of ground beef having surged to records at American supermarkets this year. Still, rebuilding the US herd could take years, potentially signaling higher prices for longer.

Trump appeared to put the blame on foreign-owned companies, driving down JBS shares. The company’s chicken subsidiary Pilgrim’s Pride Corp. donated $5 million to Trump’s inauguration committee.

Pork producer Smithfield Foods Inc., majority owned by Hong Kong-based WH Group Ltd., also dropped, while Tyson Foods Inc. slid by as much as 2% before turning higher again. The companies did not respond to immediate requests for comment. Cargill, which is one of the US’s top meatpackers and isn’t publicly traded, also did not comment.

High meat prices also bedeviled Trump’s predecessor, Joe Biden. The former president blamed costs on anti-competitive practices and consolidation and in 2022 launched an effort to allow producers to report unfair trade practices by the industry. Meatpackers have long faced criticism for being too concentrated, and have paid hundreds of millions to settle price-fixing and antitrust lawsuits.

Trump’s handling of meat prices has drawn pushback from allies in agricultural states, who say his plan to allow more imports of tariff-free Argentine beef risks undercutting American farmers.

Cattle futures have cooled recently, in part as Trump’s plans to import Argentinian beef soured investors’ outlook on prices. The move in futures markets reflects expectations that the shipments could eventually boost supplies, especially as trade talks are also ongoing with Mexico and Brazil. But it can take longer for bolstered supplies to translate into cheaper prices at the retail level.

“While Cattle Prices have dropped substantially, the price of Boxed Beef has gone up — Therefore, you know that something is ‘fishy,’” Trump said in a subsequent post.

Source: Bloomberg

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Stocks

Economic

US stocks came off session lows on Friday as investors weighed bearish consumer sentiment data and odds that the AI investment boom will pay off, while monitoring the ongoing US government shutdown for any signs of an end.

The tech-heavy Nasdaq Composite (^IXIC) pared losses to fall 0.2%, while the S&P 500 (^GSPC) erased losses to close out the session up 0.1%. The Dow Jones Industrial Average (^DJI) rose 0.1%.

Stocks pared declines after Democrats laid down conditions for a deal to end the government shutdown, a proposal that Republicans subsequently rejected. Democrats had suggested including a one-year extension of expiring health care subsidies in legislation to reopen the government.

Stocks ended a volatile week with the Nasdaq Composite posting the index's deepest loss since April, with seesaw stretches for "Magnificent Seven" stalwarts Nvidia (NVDA) and Tesla (TSLA). The S&P 500 and the Dow also closed out the bumpy week in the red as persistent worries about an AI bubble and Big Tech valuations run high.

Markets on Friday also digested more signs of an economic slowdown: namely, a bearish reading on consumer sentiment from the University of Michigan. Overall sentiment dropped to 50.3, the worst reading since 2022, as respondents fretted over the shutdown's effects.

Friday's data point came the day after October job cuts hit their highest level for the month in more than 20 years, underscoring what’s shaping up to be the worst year for layoffs since 2009.

The private data reverberated through Wall Street more than usual, given the current dearth of official updates on the economy. The Bureau of Labor Statistics was scheduled to release the October jobs report on Friday, but for a second straight month, the data's publication has been delayed by the government shutdown.

In the latest tech extravagance, Tesla approved a $1 trillion pay package for CEO Elon Musk on Thursday, setting high targets for growth in the EV maker's market value. Musk is also being asked to deliver on his promises for its robotaxi and Optimus humanoid robot — the hardware side of the AI boom. Tesla shares fell over 3%.

Source: Yahoo Finance

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Political

Economic

The Senate found itself once again gridlocked Friday and geared up for another weekend of the government shutdown, but a flurry of proposals and counterproposals did offer glimmers of hope that the two sides could be moving toward compromise.

Lawmakers debated multiple options on the Senate floor through the day Friday — from a bill to end the shutdown to another to simply pay federal workers — but saw each side object to the other's efforts.

Late Friday afternoon, Senate Minority Leader Chuck Schumer announced a new Democratic plan to reopen the government if a one-year extension of enhanced Obamacare healthcare subsidies were attached.

Republicans immediately rejected that — as did Democrats of the GOP's efforts — but a day of both sides at least talking was a contrast to weeks of non-communication.

Senate Majority Leader John Thune told reporters he hopes another idea he is floating — a new bill that could include a new end date for the shutdown and full-year authorization for some programs — could gain traction and suggested he might try a vote on it by this weekend.

As for a takeaway for markets, Pangaea Policy founder Terry Haines joined Yahoo Finance and could offer only that the shutdown will "probably" end by Thanksgiving.

"The practical pain that people will go through," he added, "probably plays a role in all of that."

Ed Mills at Raymond James added, "We believe we are at the beginning of the end, but are unlikely to see a resolution pass into law before next week."

Election results haven't helped shutdown talks

The week is also ending with new political challenges, particularly election results that saw the Democratic Party gain across the board.

Prominent Democrats, like Sen. Chris Murphy of Connecticut, immediately responded that the results were a message to keep fighting.

It was no coincidence, Murphy wrote, that "these big wins came at the exact moment when Democrats are using our power to stand for something and be strong."

Meanwhile, President Trump has shown no signs of offering concessions and has continued to ignore pressure to meet with Democrats for negotiations.

The president repeated calls this week to change the Senate's filibuster rules, including three separate social media posts Friday morning, as well as during an appearance at the White House alongside Hungarian Prime Minister Viktor Orbán.

The president also appeared with Senate Republicans on Wednesday and rhetorically asked if this week's election results could herald a quicker end to the shutdown.

He then immediately answered his own question, saying, "I don't think so."

The gridlock among leaders comes as moderate lawmakers continue to negotiate with Republicans — Politico reported that one such meeting is on the books for Friday — but the ongoing search for a path forward faces difficult political terrain.

The mood music of spiraling economic costs

The ongoing gridlock on Capitol Hill also comes as economic costs continue to mount.

US airlines have canceled hundreds of flights after a Federal Aviation Administration order reduced air traffic capacity by 4% Friday morning.

That first cut took effect at 6 a.m. ET Friday at 40 high-traffic airports and will deepen next week and reach a cut of 10%.

Transportation Secretary Sean Duffy has warned that an already difficult travel situation could soon descend into "mass chaos."

Duffy added in a Fox News appearance Friday that air traffic capacity could be cut further — 15% or even 20% — if the stalemate continues beyond that.

Meanwhile, a federal judge in Rhode Island on Thursday ordered the Trump administration to immediately cover Supplemental Nutrition Assistance Program (SNAP) benefits for tens of millions of Americans.

The Trump administration had previously announced plans to pay only partial benefits for the program, which is relied on by about 1 in 8 Americans, but late on Friday, the US Department of Agriculture announced it would be paying "full issuances" after all.

Source: Yahoo Finance

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Commodity

Political

Oil rose on Friday but still notched a second weekly loss as the market continued to weigh the threat to output from sanctions on Russia against a looming oversupply.

West Texas Intermediate futures rose around 0.5% to settle below $60 a barrel, but were still down for the week. Adding to fears of a glut, oil prices have also been buffeted by swings in equity markets this week.

Meanwhile, the White House’s move to clamp down on the buying of Russian crude led oil trading giant Gunvor Group to withdraw an offer for the international assets of Lukoil PJSC. The fate of the assets, which include stakes in oil fields, refineries and gas stations, remains unclear.

Prices pared some gains in post-settlement trading after Hungary won an exemption from US sanctions on Russian energy, Prime Minister Viktor Orban said following talks with US President Donald Trump. The development appeared to allay shortage fears, given that Budapest imports over 90% of its crude from Moscow.

Senior industry figures have warned the latest US curbs on Russia’s two largest oil companies are beginning to have an impact on the market, particularly in diesel, where prices have been surging in recent days, with time spreads for the fuel signaling supply pressure. Oil Notches Second Weekly Loss Amid Sanctions, Looming Surplus_1

Oil Notches Second Weekly Loss Amid Sanctions, Looming Surplus_1

At the same time, the US measures have come against a backdrop of oversupply that has weighed on key crude oil metrics. The spread between the nearest West Texas Intermediate futures closed at the weakest level since February on Thursday.

“If the market flips to contango, we may see more bearish funds enter the crude space,” said Dennis Kissler, senior vice president for trading at BOK Financial said of the potential that longer-dated contracts trade at a premium to nearer-term ones. “Most traders remain surprised that US crude oil production remains as strong as it has given the latest price drop.”

Supplies from both within and outside of the Organization of the Petroleum Exporting Countries and its allies are set to surge at the end of this year and into 2026, with the International Energy Agency expecting a record oversupply. While the rising volumes of oil are beginning to show up on tankers, key storage hubs aren’t yet feeling the impact. US oil inventories ended October lower than where they started the month.

China — the second-largest crude consumer — said on Friday that imports rose in October from a year ago. But the country’s pace of stockpiling is expected to slow, potentially removing a support for prices.

Next week, traders will be looking to a raft of reports, including from the IEA and OPEC, to get further insights into the supply-demand balance as the year-end approaches.

Source: Bloomberg

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Cryptocurrency

Bitcoin (BTC-USD) had a rough week, with the token briefly slipping below $100,000, its lowest level in six months.

On Friday, the world's largest cryptocurrency was sitting as much as 20% off its all-time high of above $126,000 notched on Oct. 6.

Wall Street has attributed the slide to early adopters offloading their large holdings. Since late June, net sales from long-term holders have exceeded 1 million bitcoin, according to research from Compass Point analyst Ed Engel.

A massive liquidation of leveraged crypto positions on Oct. 10 also weighed on the market, with bitcoin struggling to find a footing after breaking below support levels of $117,000 and then $112,000.

“We haven’t really reclaimed this level since then, and I think that’s a sign we are, unfortunately, in a bear market,” Markus Thielen, founder and CEO of Singapore-based 10X Research told Yahoo Finance on Friday morning.

Thielen’s firm, which last month predicted bitcoin would fall to $100,000, now expects the market may still be “a few weeks away” from reaching a buyable bottom.

“I think there’s this brief risk where we could correct quite a bit more,” he added

10X Research said the marginal buyer is stepping back as capital that chased higher prices has either been flushed out or is no longer bidding with conviction. Fund managers with long exposure through exchange-traded funds may also be forced to trim positions as underlying asset prices decline.

The dollar’s recent bottom could also pose a challenge for crypto markets. A continued rally in the greenback may be a potential headwind for bitcoin.

"There's this air pocket below $93,000, and there is not much support," Thielen said. "It could be that there is going to be some liquidation that brings us to potentially the $70,000 level."

"Historically these OG investors (early adopters), they tend to sell at the top of the cycle, only to buy back in later again, and I think that's probably what we're going to see here," he added.

Bullish catalysts that could lift prices include a potential Federal Reserve rate cut in December and the prospect of more dovish leadership at the central bank, with Chair Jerome Powell’s term set to expire in May.

The reopening of the US government could also provide a tailwind for crypto, as some strategists expect additional liquidity from government spending to flow back into markets and support prices.

"The shutdown is stifling liquidity conditions and it is furthering growth concerns," Sean Farrell, head of digital assets at Fundstrat, said in a Thursday video to clients.

JPMorgan said in a note on Wednesday that the deleveraging episode that sent bitcoin lower in October “is largely behind us.”

JPMorgan managing director Nikolaos Panigirtzoglou added that “the rise in gold volatility over the past month has made bitcoin more attractive” to investors relative to gold.

That comparison implies “significant upside for bitcoin over the next 6–12 months," potentially sending the price as high as $170,000.