Shutdown to leave mark on US economy from lost paychecks, cancelled flights
Washington (AP): The longest federal government shutdown in US history appears to be nearing an end, but not without leaving a mark on an already-struggling economy.
About 1.25 million federal workers haven't been paid since October 1. Thousands of flights have been cancelled, a trend that is expected to continue this week even as Congress moves toward reopening the government. Government contract awards have slowed and some food aid recipients have seen their benefits interrupted.
Most of the lost economic activity will be recovered when the government reopens, as federal workers will receive back pay. But some cancelled flights won't be retaken, missed restaurant meals won't be made up, and some postponed purchases will end up not happening at all.
“Short-lived shutdowns are usually invisible in the data, but this one will leave a lasting mark," Gregory Daco, chief economist at accounting giant EY said, "both because of its record length and the growing disruptions to welfare programs and travel.”
The Congressional Budget Office estimated that a six-week shutdown will reduce growth in this year's fourth quarter by about 1.5 percentage points. That would cut growth by half from the third quarter. The reopening should boost first-quarter growth next year by 2.2 percentage points, the CBO projected, but about USD 11 billion in economic activity will be permanently lost.
The previous longest government shutdown, in 2018-2019, lasted 35 days but only partially shut the government because many agencies had been fully funded. It only nicked the economy by about 0.02 per cent of GDP, the CBO said then.
The current shutdown is adding to the economy's existing challenges, which include sluggish hiring, stubbornly elevated inflation, and President Donald Trump's tariffs, which have caused uncertainty for many businesses. Still, few economists foresee a recession.
About 650,000 federal workers didn't work during the shutdown, which will likely boost the unemployment rate by about 0.4 percentage points in October, or to 4.7 per cent from 4.3 per cent in August, when the last report was released. Those workers would all then be counted as employed once the government reopens.
Here are the ways the government closure is weighing on the economy:
Missed paychecks
All told, federal workers will have missed about USD 16 billion in wages by mid-November, the CBO estimates. That has meant less spending at stores, restaurants, and likely reduced holiday travel. Large purchases will probably be postponed, slowing the broader economy.
Trump had threatened during the shutdown to not provide back pay but the deal struck in Congress would replace those lost wages once the government reopens.
The shutdown has added to the Washington, DC area's economic woes, where the unemployment rate was already 6 per cent before the shutdown, after Trump's cuts to the federal workforce this spring caused job losses.
While the Washington, DC area — including the nearby suburbs in Virginia and Maryland — have the highest concentration of federal workers, most live and work outside of the nation's capital.
Federal workers make up about 5.5 per cent of Maryland's workforce, according to the Bipartisan Policy Centre. But they also comprise 2.9 per cent of New Mexico's workers, 2.6 per cent of Oklahoma's, and 3.8 per cent of Alaska's.
Then there are the federal contractors. Bernard Yaros, an economist at Oxford Economics, estimates they could total as many as 5.2 million, and they are not guaranteed back pay once the shutdown ends.
Flight disruptions
Airlines scrapped more than 2,000 flights by Monday evening after cancelling 5,500 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 travel spending by USD 63 million a day, which means a six-week standoff would cost the travel industry USD 2.6 billion.
The cancelled 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 government does reopen.
Consumer sentiment
The shutdown has worsened Americans' outlook on the broader economy. Declining consumer sentiment can over time reduce spending and slow growth, though in recent 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, reported Friday, with pessimism over personal finances and anticipated business conditions weighing on Americans.
The November survey showed the index of consumer sentiment at 50.4, down a startling 6.2 per cent from last month and a plunge of nearly 30 per cent from a year ago.
Federal spending
While the shutdown hasn't cut off all federal government spending, it has reduced purchases of equipment and has cut off the issuance of new contracts.
Yaros estimates that about USD 800 million in new contracts were at risk of not being awarded each day of the shutdown.
“The federal award spigot has all but turned off at the Department of Defence, NASA, and the Department of Homeland Security,” Yaros wrote.
SNAP benefits
The shutdown delayed the payment of USD 8 billion in monthly SNAP food aid to 42 million recipients in November, creating a significant financial disruption for many households that likely reduced spending. Some states have managed to pay full benefits for this month, though the Trump administration is still fighting over the issue in court.
The deal currently under consideration in Congress to reopen the government includes full funding of SNAP benefits.
Interest rate cuts
The government shutdown cut off the flow of economic data on unemployment, inflation, and retail spending that the Federal Reserve depends on to monitor the economy's health.
Even as the government reopens, some of that data will still be delayed. As a result, 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 said at a news conference late last month.
Powell said the Fed's interest-rate setting committee is deeply divided over whether to reduce its key rate, partly because the economy's health is unusually cloudy right now.
The government has missed two monthly jobs reports and the October inflation data, scheduled to be published Thursday, will likely never be issued.
Powell said a rate cut in December was not a “foregone conclusion” and added that the lack of data could contribute to a decision by the Fed to skip a rate cut at its next meeting December 9-10. Fewer rate cuts could discourage borrowing and spending and weigh on the economy in the coming months.
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Screenwriter Salim Khan on ventilator support and stable, say doctors
Mumbai (PTI): Veteran screenwriter Salim Khan suffered a brain haemorrhage which has been tackled, is on ventilator support as a safeguard and stable, doctors treating him said on Wednesday, a day after he was admitted to the Lilavati Hospital here.
The 90-year-old, one half of the celebrated Salim-Javed duo which scripted films such as "Sholay", "Deewar" and "Don" with Javed Akhtar, is in the ICU and recovery might take some time given his age.
"His blood pressure was high for which we treated him and we had to put him on a ventilator because we wanted to do certain investigations. Now the ventilator was put as a safeguard so that his situation doesn't get worse. So it is not that he is critical," Dr Jalil Parkar told reporters.
"We did the investigations that were required and today we have done a small procedure on him, I will not go into the details. The procedure done is called DSA (digital subtraction angiography). The procedure has been accomplished, he is fine and stable and shifted back to ICU. By tomorrow, we hope to get him off the ventilator. All in all, he is doing quite well," he added.
Asked whether he suffered a brain haemorrhage, the doctor said, "Unko thoda haemorrhage hua tha, which we’ve tackled. No surgery is required.
As concern over Khan's health mounted, his children, including superstar Salman Khan and Arbaaz Khan, daughter Alvira, and sons-in-law Atul Agnihotri and Aayush Sharma, have been seen outside the hospital along with other well-wishers. His long-time partner Akhtar was also seen coming out of the hospital.
Khan, a household name in the 70s and 80s, turned 90 on November 24 last year. It was the day Dharmendra, the star of many of his films, including "Sholay", "Seeta aur Geeta" and "Yaadon Ki Baraat", passed away.
Hailing from an affluent family in Indore, Khan arrived in Mumbai in his 20s with dreams of stardom. He was good looking and confident he would make a mark in the industry as an actor. But that did not happen. And then, after struggling for close to a decade and getting confined to small roles in films, he changed lanes.
He worked as an assistant to Abrar Alvi and soon met Akhtar to form one of Hindi cinema's most formidable writing partnerships. They worked together on two dozen movies with most of them achieving blockbuster status.
Other than "Sholay", "Deewar" and "Don", Khan and Akhtar also penned "Trishul", "Zanjeer", "Seeta Aur Geeta", "Haathi Mere Saathi", "Yaadon Ki Baarat" and "Mr India".
