The Watchdog – Home and Abroad
November 10, 2025
Summary: The US government shutdown is now the longest in US history (past 40 days); private sector economic data shows softening labor markets; consumer sentiment is shaky; and “soft landing” talk has resurfaced. The dominant narratives are the US economy’s uncertain direction; will the market see further valuation corrections especially in tech; and is the shutdown now set to end? Over the weekend there was some progress in the Senate with a bill being passed 60-40, with the help of eight Democratic senators. The issue still is not fully resolved. One thing is certain – the longer the shutdown continues, the more problematic the damage is to large numbers of Americans, which could turn sentiment more bearish as to the economy and markets. On the geopolitical front, the dark skies over US-China trade have cleared – for now; tensions in the Southern Caribbean continue to smolder, and over the weekend lithium-rich Bolivia swore in its first conservative president in 20 years, ending two decades of socialist governance.
Headlines - At Home
The week ahead – by the numbers. Without US government data the week ahead is light. Nothing is scheduled for Monday, Tuesday is Veterans Day, and the rest of the week is busy with speaking Fed officials. Last week’s numbers were not inspiring: ISM Manufacturing for October sank deeper into what is regarded as recessionary territory; ADP employment (private sector only) actually came in better than expected at 42,000 (up from-29K the month prior); ISM services hovered at the 50% mark; and the Challenger, Gray & Christmas report showed that 153,074 job cuts were announced in October, up 175% compared to a year ago. Earnings are light over the upcoming week. We should add that even if an agreement to break the impasse over the shutdown occurs, it will take some time before US government economic flows resume.
Ending the shutdown. Over the weekend the US Senate voted 60-40 to advance a deal to end the shutdown for debate on the Senate floor. Eight centrist Democrats joined the Republicans to reopen the federal government and keep it funded until the end of January. The deal would reverse the layoffs initiated by the White House during the closure and guarantees that furloughed workers receive back pay. The agreement also includes a concession by Democrats on healthcare tax credits, which are due to expire at year-end. The Democrats insist these should be extended; healthcare tax credits may be off the table for Republicans but is likely to figure large in the run-up to the proposed end-January deadline. The agreement still needs to be passed in the Senate (which could happen quickly) and passed after which it needs to be signed off by the Republican-controlled House of Representatives. Two things to take from this: both parties are beginning to feel the heat of public dissatisfaction over the disruption of government services, the uncertainty over SNAP, and, probably most of all, the increasing disruption of air travel, especially with Thanksgiving not far away. The second thing is that while Trump will no doubt proclaim this as victory, the deal is also a victory of sorts for centrist Democrats, who prefer a more pragmatic approach to resolving the shutdown rather than sticking to an issue that the Republicans refused to budge on. This is pointed at getting SNAP up and running, getting government workers back, and air travel. Good news for now; more fun to come in January!
Quick snapshot of US economy mixed bag. Although the country is not in a recession, many Americans are beginning to feel that way. According to Pew Research, in October 2025 74% of Americans describe economic conditions as only fair or poor (including 56% of Republicans and 90% of Democrats). There are good reasons for this: inflation has yet to be fully vanquished (a trip to the grocery store confirms this as do auto insurance costs), unemployment (based on a collection of private sources) appears to be nudging towards 4.4%, and there have been several large-scale worker layoffs, which are increasingly seen in the public mind as harbingers of a greater AI-driven culling of white collar jobs. The government shutdown is not helping boost sentiment about the economy.
Although government data is missing there is private sector data. According to the payroll processor ADP, private sector employment added 42,000 jobs in October. This was the first monthly gain since July, but well below where jobs were in the first half of the year. While trades, transportation and utilities accounted for most of the gains, professional services and information sectors, critical to white collar employment, lost ground.
Another data drop came from the University of Michigan preliminary survey of consumers, which showed that in early November US consumer sentiment cratered by 6% from October. The key reasons were an increasing concern as to the impact of the government shutdown on the economy and worries over personal finances and inflation.
Much of this sentiment was captured in the earnings for fast-food casual companies, like Chipotle, Cava, Dutch Bros, Shake Shack and Starbucks. Chipotle’s CEO Scott Boatwright noted that business falloff came from household incomes under $100,000 per year, with “a particularly challenged cohort being the 25-to-35-year-old age group, facing several headwinds, increased student loan repayment and slower real wage growth.”
Another dollop of worrisome data came from the ISM Manufacturing Index which showed that US factory activity shrank for an eighth consecutive month. According to Susan Spence, chair of the ISM Manufacturing Business Survey Committee, manufacturers are still concerned about the general lack of clarity about trade policy. The biggest losers were textiles, apparel and furniture, while primary metals and transportation equipment grew.
Running against this Gloomy Gus sentiment is that the Q3 earnings season has been strong, most companies are riding through an erratic tariff policy environment, energy prices are low, and the Chinese are buying US soybeans again. One plus mark supporting the resilience of the US economy came from the ISM Services Index, which remained in positive territory, rising 2.4 points over October. This was the fastest pace in eight months.
We expect Q4 will cool from Q3 real GDP growth of around 4.0% to between 1.1%-1.5%. We would add the caveat that if the government shutdown continues through year-end, real GDP could dip further, possibly into negative territory. We already think that the Fed will cut rates again in December, but there should be enough private economic data to indicate that things are not heading in the right direction for many Americans.
Headlines – Abroad
Venezuela is not going away…but Maduro might. While there is considerable debate surrounding President Trump’s military buildup aimed at Venezuela and strikes against alleged drug traffickers in the Southern Caribbean, there is little debate about the Maduro regime’s gross economic mismanagement. Since Nicolás Maduro assumed power in 2014, he has run Venezuela, once one of the wealthiest countries in Latin America, into the ground, providing the impetus for over 8 million Venezuelans to leave their country. The socialist utopia, which is backed by China, Cuba, Iran and Russia, is expected to see inflation hit 270% by year-end and up to 680% next year, according to the IMF. At the same time, it is estimated that 86% of Venezuelans live in poverty. The threat of a US armed intervention is certainly not desired in the Caribbean and Latin America as it brings back memories of previous US interventions (as with Operation Just Cause in Panama in 1989). Yet Venezuela’s 2024 elections, based on dialogue and the Barbados Agreement for fair and free elections, were blatantly stolen by Maduro, who quickly resorted to another round of repression. Dialogue has gone nowhere and is not likely to in the future. With the US ratcheting up the pressure, both with military threats and economic measures, the Venezuelan economy is set to take another major tumble. A recent survey conducted by pollster Es Noticia found that only 20% of Venezuelans blamed US sanctions for the country’s economic problems, down from 33% in September. As one Venezuelan recently told a Financial Times reporter, “If the gringos are going to intervene, let them do it already. We tried voting and they threw us in jail, and now we’re scraping by, so what else can we do?” Sadly, the answer to that question is for more Venezuelans to leave their country, a prospect which is more difficult considering that much of Latin America, the US and Caribbean is less welcoming than before.
Scott B. MacDonald, Ph.D.
Chief Economist,
Smith’s Research & Gradings.
