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 commercial sector 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 executive Regime contract awards have slowed and a few food aid recipients have seen their benefits interrupted The greater part of the lost economic activity will be recovered when the establishment 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 various postponed purchases will end up not happening at all Short-lived shutdowns are usually invisible in the records but this one will leave a lasting mark Gregory Daco chief economist at accounting giant EY disclosed both because of its record length and the growing disruptions to welfare programs and tour The Congressional Budget Office estimated that a six-week shutdown will reduce rise in this year s fourth quarter by about percentage points That would cut rise by half from the third quarter The reopening should boost first-quarter upsurge next year by percentage points the CBO projected but about billion in economic activity will be permanently lost The previous longest governing body shutdown in - lasted days but only partially shut the executive because plenty of agencies had been fully funded It only nicked the business sector by about of GDP the CBO mentioned then The current shutdown is adding to the economic activity s existing challenges which include sluggish hiring stubbornly elevated inflation and President Donald Trump s tariffs which have caused uncertainty for multiple businesses Still meager 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 distributed Those workers would all then be counted as employed once the authorities reopens Here are the options the ruling body closure is weighing on the market Missed paychecks All reported 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 presumably be postponed slowing the broader market 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 leadership 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 largest part live and work outside of the nation s capital Federal workers make up about of Maryland s workforce according to the Bipartisan Initiative 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 countless 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 voyage 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 cabinet does reopen Consumer sentiment The shutdown has worsened Americans outlook on the broader commercial sector Declining consumer sentiment can over time reduce spending and slow improvement 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 communicated Friday with pessimism over personal finances and anticipated business conditions weighing on Americans The November survey displayed 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 authorities 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 hazard 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 Safety Yaros wrote SNAP benefits The shutdown delayed the payment of billion in monthly SNAP food aid to million recipients in November creating a vital financial disruption for multiple households that likely reduced spending Certain states have managed to pay full benefits for this month though the Trump administration is still fighting over the issue in court The deal presently under consideration in Congress to reopen the regime includes full funding of SNAP benefits Interest rate cuts The authorities shutdown cut off the flow of economic evidence on unemployment inflation and retail spending that the Federal Reserve depends on to monitor the market system s wellbeing Even as the executive reopens specific of that statistics will still be delayed As a outcome 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 revealed at a news conference late last month Powell stated the Fed s interest-rate setting committee is deeply divided over whether to reduce its key rate partly because the economic system s fitness is unusually cloudy right now The ruling body has missed two monthly jobs reports and the October inflation details 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 financial market in the coming months Source