FORTUNE -- The monthly jobs report released Friday was better than expected, but anyone who thinks this means the Federal Reserve will start slowing down its economic stimulus program is probably overlooking Washington's dysfunction.
Recall in October, Uncle Sam was forced to partially shut down its offices and services after Congress stalled on budget talks. This wasn't all that surprising to the Fed, which expected that lawmakers would have a hard time getting their act together before hitting critical budget deadlines. In September, policymakers surprised Wall Street when they delayed plans for tapering its $85-billion-a-month bond purchase program.
Once again, the Fed may have to prepare if there's another debt fight. The federal government may have reopened for business, but it's funded only through January 15. And the U.S. could hit the debt ceiling again in early February.
True, Washington's stalemate didn't seem to have a negative impact on jobs growth; even though thousands of federal employees were out of work for more than two weeks during the government shutdown, the economy added 204,000 jobs in October -- higher than the average job gain of about 180,000 in the first nine months of this year.
The Labor Department also revised up jobs gains from the summer months. And even though October's unemployment rate rose slightly to 7.3% from 7.2% because of the thousands of furloughed employees, those employees returned to work when the government reopened.
All this might suggest Washington won't destroy the economy after all, but that may be putting too much faith in Congress. A government shutdown is very different from a government default, which economists fear could cause the U.S. dollar to collapse and all kinds of other havoc. And while Congress avoided having to miss its debt payments during the last budget fight, it was still a very close call and there's no assurance a default won't happen if a debt fight ensues early next year.
This isn't to say the monthly jobs report is no longer relevant to the Fed -- policymakers watch it closely to figure out what's best for the economy. However, the Fed has shown that Washington stalemate has become a more immediate threat to the economy than anything the jobs report says. With so much uncertainty still plaguing Capitol Hill, it's hard to see how the central bank will blindly cheer October's employment picture.
The central bank noted that the housing recovery is slowing, but it's no cause for alarm.
FORTUNE -- The Federal Reserve on Wednesday pressed ahead with its stimulus program of asset purchases and low interest rates. Yup, as widely expected (and reported), the end of its two-day meeting was pretty much a snoozer: For the most part, the central bank made few changes to its description of the state of the economy, MORENin-Hai Tseng, Writer - Oct 31, 2013 10:56 AM ET
Removing the immediate threat of a global recession associated with a U.S. debt default would do little to strengthen business and consumer confidence that is so critical to a strong economic recovery.
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FORTUNE -- If you are a federal employee, a tourist visiting our national sites, or an investor, you've already felt the consequences of the latest Congressional theatrics. If the current deadlock continues, it is just MOREOct 14, 2013 3:41 PM ET
According to a study done by the St. Louis Federal Reserve, companies are hoarding cash because of policy uncertainty.
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FORTUNE -- How much is Washington dysfunction harming the U.S. economy? Policymakers' disaccord could be doing major behind-the-scenes economic damage. According to economists Juan Sanchez and Emircan Yurdagül at the St Louis Federal Reserve, U.S. companies are hoarding loads of cash specifically because of policy uncertainty. As a MOREOct 14, 2013 2:06 PM ET
While the U.S. federal government struggles to avoid default, finances across cities and states are on the mend.
FORTUNE – While the U.S. federal government struggles to gets its finances in order and avoid default, budgets in America's cities and states are improving.
The development is unexpected and a near reversal of the financial strains municipalities went through in the wake of the 2007 financial crisis. Property tax revenue plummeted as home prices MORENin-Hai Tseng, Writer - Oct 11, 2013 10:39 AM ET
If you think the JPMorgan and Wells Fargo earnings reports were disappointing, just wait until the fourth quarter if the shutdown continues and a debt default occurs.
By Cyrus Sanati
FORTUNE -- JPMorgan and Wells Fargo kicked off bank earnings season Friday morning reporting some less-than-stellar results. Weak loan volumes, shrinking net interest margins, legal mishaps, lackluster trading activity, and a lousy mortgage market wreaked havoc on the megabanks during the MOREOct 11, 2013 10:14 AM ET
Republican leaders hope that if President Obama won't cave on the Affordable Care Act, he might agree to hold down costs on Social Security and Medicare instead.
By Nina Easton, senior editor
FORTUNE -- Here's a comforting thought: House Republican leaders didn't really think their actions would lead to a government shutdown. "We stumbled into a situation that nobody planned,'' confesses one GOP member of Congress.
Great. The economy teeters somewhere between MOREOct 4, 2013 10:48 AM ET
Even in a default, many investors would see Treasuries as safer than stocks.
FORTUNE -- As Congress seems nowhere closer to resolving the nation's budget problems on day four of the government shutdown, federal officials have raised fresh warnings the U.S. could default on its debt.
Credit markets could freeze, the dollar's value could spiral, and U.S. interest rates could skyrocket, the U.S. Treasury Department warned Thursday. If Congress fails to lift MORENin-Hai Tseng, Writer - Oct 4, 2013 5:00 AM ET
Re/Max CEO Margaret Kelly talks about the decision to go ahead with their IPO on day two of the federal government shutdown.
FORTUNE -- Wall Street may be getting jittery as Congress struggles to resolve the nation's budget problems, but investors betting on America's housing market don't seem fazed by Washington's dysfunction.
On the second day of the government shutdown, real estate brokerage Re/Max Holdings (RMAX) made its debut on the New York MORENin-Hai Tseng, Writer - Oct 3, 2013 9:56 AM ET
Neither the domestic nor international financial systems are prepared for the most powerful economy in the world to become irrational in how it runs its finances.
By Mohamed A. El-Erian
FORTUNE -- Given the rather muted market response to the government shutdown, some Republican lawmakers may be tempted to take the debt ceiling hostage next. That would be a tragedy for America. The damage would be a multiple of anything that MOREOct 3, 2013 9:03 AM ET
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