Government shutdowns usually don’t hurt the economy much. Markets often bounce back, and growth tends to lose only about 0.1 percentage point of GDP per week, even in a long, 35-day shutdown. But this round could be different because there’s a public threat to make some furloughs permanent. That would hit the job market, especially in the D.C. area, and add new uncertainty. Analysts at Barclays and Nomura warn that permanent cuts would be a sharp break from past practice. NerdWallet notes that even a short gap in pay can push families into money trouble.
There’s also a data problem. If the Labor Department closes, the Bureau of Labor Statistics will delay key reports like jobs and inflation, and quality could slip. That means Social Security cost-of-living updates could be affected, and the Federal Reserve might have to lean on private data when making rate decisions. We’ve seen delays before, like in 2013, and Bank of America still expects the overall economic impact to be mild. The big risks this time are permanent job losses and a data blackout that clouds decision-making.
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I also read that this shutdown is already decreasing consumer confidence with job availability being lower than usual. If this shutdown delays reports people will not have information about this making the economy even more unpredictable.
ReplyDeleteYeah I feel like the main thing is the uncertainty that the shutdown will cause. I also think that the lack of data could maybe affect the credibility of the Fed's decisions and even affect how accurate they are.
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