US government shutdown could delay news of Social Security increase

(Reuters) - One of the most highly anticipated announcements watched for each year by more than 70 million U.S. retirees and government benefits recipients could well be delayed by any federal government shutdown lasting more than a few days: Their annual pay increase.

With a partial government shutdown beginning on Sunday looking ever more likely amid an ongoing standoff in Congress, the U.S. Labor Department has advised that all economic data gathering and publishing activities conducted by the Bureau of Labor Statistics would cease for as long as the government remains closed.

A shutdown that stretches deeper into October would threaten the scheduled release of the Consumer Price Index for September currently set for Oct. 12, the department said.

That could mean a delay in the much-anticipated announcement of the annual cost of living adjustment (COLA) to the monthly benefits paid out by the Social Security Administration.

Any announcement delay, however, would not likely affect when the new payment amounts take effect. The new rate will start to be paid to Social Security retirement benefits recipients in January 2024, while payments to SSI beneficiaries typically change at the end of each December.

The COLA is determined by the annual change at the end of each year's third quarter in the CPI for Urban Wage Earners and Clerical Workers, or CPI-W, published each October by the BLS.

"A delay of the CPI release may have an impact on the COLA announcement by the Social Security Administration," according to a Labor Department memo detailing how a shutdown would affect agency operations.

The SSA did not immediately reply to a request for comment.

Last year, with annual inflation raging near the highest in four decades, the COLA announced for 2023 payments was 8.7%, the largest increase since 1981 and the fourth biggest ever. Price increases have slowed sharply this year in the face of stiff interest rate increases by the U.S. Federal Reserve, meaning that throughout this year more than 65 million Social Security retirement benefits recipients and more than 7 million Supplemental Security Income (SSI) beneficiaries have seen the largest increases in their real incomes - relative to inflation - in a generation.

Another larger-than-average COLA increase may be in the cards this year. While inflation has slowed from its peak rate in the summer of 2022, it remains above the rate that prevailed over the 10 years prior to the pandemic. The COLA has averaged 2.8% since 1984, but it averaged just 1.4% from 2010 through 2019 and in three of those 10 years no increase was given at all.

In August, CPI-W was up 3.4% year-on-year and had ticked up since June largely because of higher gasoline prices. Still, whatever COLA is announced for 2024 is unlikely to offer the same buffer over inflation as recipients enjoyed in 2023.

(Reporting by Dan Burns and Lucia Mutikani; Editing by Lisa Shumaker)