Shutdown to leave mark on US economy from lost paychecks, canceled flights

WASHINGTON AP The longest federal regime shutdown in U S history appears to be nearing an end but not without leaving a mark on an already-struggling financial market About million federal workers haven t been paid since Oct Thousands of flights have been canceled a trend that is expected to continue this week even as Congress moves toward reopening the authorities Governing body contract awards have slowed and particular food aid recipients have seen their benefits interrupted The greater part of the lost economic activity will be recovered when the regime reopens as federal workers will receive back pay But chosen canceled flights won t be retaken missed restaurant meals won t be made up and several postponed purchases will end up not happening at all Short-lived shutdowns are usually invisible in the facts but this one will leave a lasting mark Gregory Daco chief economist at accounting giant EY stated both because of its record length and the growing disruptions to welfare programs and progress The Congressional Budget Office estimated that a six-week shutdown will reduce development in this year s fourth quarter by about percentage points That would cut expansion by half from the third quarter The reopening should boost first-quarter enhancement next year by percentage points the CBO projected but about billion in economic activity will be permanently lost The previous longest regime shutdown in - lasted days but only partially shut the authorities because countless agencies had been fully funded It only nicked the market system by about of GDP the CBO disclosed then The current shutdown is adding to the financial system s existing challenges which include sluggish hiring stubbornly elevated inflation and President Donald Trump s tariffs which have caused uncertainty for multiple businesses Still inadequate economists foresee a recession About federal workers didn t work during the shutdown which will likely boost the unemployment rate by about percentage points in October or to from in August when the last analysis was circulated Those workers would all then be counted as employed once the ruling body reopens Here are the means the administration closure is weighing on the economic system Missed paychecks All recounted federal workers will have missed about billion in wages by mid-November the CBO estimates That has meant less spending at stores restaurants and likely reduced holiday advance Large purchases will seemingly be postponed slowing the broader economic system Trump had threatened during the shutdown to not provide back pay but the deal struck in Congress would replace those lost wages once the establishment reopens The shutdown has added to the Washington D C area s economic woes where the unemployment rate was already before the shutdown after Trump s cuts to the federal workforce this spring caused job losses While the Washington D C area including the nearby suburbs in Virginia and Maryland have the highest concentration of federal workers the bulk live and work outside of the nation s capital Federal workers make up about of Maryland s workforce according to the Bipartisan Strategy Center But they also comprise of New Mexico s workers of Oklahoma s and of Alaska s Then there are the federal contractors Bernard Yaros an economist at Oxford Economics estimates they could total as several as million and they are not guaranteed back pay once the shutdown ends Flight disruptions Airlines scrapped more than flights by Monday evening after canceling since Friday on orders from the Federal Aviation Administration which is seeking to reduce the burden on overworked air traffic controllers who have now missed two paychecks Even before the flight cancellations Tourism Economics an economic consulting firm estimated that the shutdown would reduce movement spending by million a day which means a six-week standoff would cost the expedition industry billion The canceled flights also mean less business for hotels restaurants and taxi drivers And federal employees have already pulled the plug on upcoming trips according to Tourism Economics which may not be able to be rescheduled even when the establishment does reopen Consumer sentiment The shutdown has worsened Americans outlook on the broader financial market Declining consumer sentiment can over time reduce spending and slow increase though in new years Americans have kept shopping even when their outlooks turned grim Consumer sentiment dropped to a three-year low and close to the lowest point ever recorded in a survey by the University of Michigan shared Friday with pessimism over personal finances and anticipated business conditions weighing on Americans The November survey established the index of consumer sentiment at down a startling from last month and a plunge of nearly from a year ago Federal spending While the shutdown hasn t cut off all federal leadership spending it has reduced purchases of equipment and has cut off the issuance of new contracts Yaros estimates that about million in new contracts were at threat of not being awarded each day of the shutdown The federal award spigot has all but turned off at the Department of Defense NASA and the Department of Homeland Guard Yaros wrote SNAP benefits The shutdown delayed the payment of billion in monthly SNAP food aid to million recipients in November creating a notable financial disruption for a multitude of households that likely reduced spending Particular states have managed to pay full benefits for this month though the Trump administration is still fighting over the issue in court The deal right now under consideration in Congress to reopen the regime includes full funding of SNAP benefits Interest rate cuts The governing body shutdown cut off the flow of economic statistics on unemployment inflation and retail spending that the Federal Reserve depends on to monitor the economic activity s fitness Even as the authorities reopens a few of that records will still be delayed As a effect the Fed may not deliver a third interest rate cut at its December meeting which was widely expected before the shutdown What do you do if you re driving in the fog You slow down Fed Chair Jerome Powell mentioned at a news conference late last month Powell mentioned the Fed s interest-rate setting committee is deeply divided over whether to reduce its key rate partly because the business sector s healthcare is unusually cloudy right now The administration has missed two monthly jobs reports and the October inflation facts scheduled to be published Thursday will likely never be issued Powell explained a rate cut in December was not a foregone conclusion and added that the lack of figures could contribute to a decision by the Fed to skip a rate cut at its next meeting December - Fewer rate cuts could discourage borrowing and spending and weigh on the economic activity in the coming months Source