5 Ways the Federal Government Shutdown Has Affected the Economy

One estimate by Standard & Poor’s, a financial rating agency, showed that the cost of the latest government shutdown to the economy was $6 billion. Everything from lost productivity – based on federal worker furloughs – to slowed purchasing activity at various businesses plays a role in the final price tag. If you are wondering just how much the federal government shutdown has affected the economy, here are five.

1. Slowed GDP Growth

Although no one knows the exact impact of the shutdown, there was damage to the U.S. gross domestic product (GDP). Quarterly economic growth was likely cut by about 0.13 percent points for each week it carried on. This led to about a 0.65 percent estimated decline since the shutdown lasted nearly five weeks. An estimate also suggested that around 380,000 workers were not producing services that they typically would during the shutdown period.

It is true that GDP growth losses may recover by the second quarter. However, since the government may shut down again if a deal isn’t reached by mid-February, there could be more damage.

2. Household Spending

During the shutdown, about 800,000 federal workers weren’t receiving paychecks. Additionally, individuals who contract with the government but are not official employees may have also seen their wages paused.

As a result, spending changed dramatically for many households. In some cases, people spent less on groceries. They also spent less on gas for their vehicles, and other common categories to increase their odds of remaining solvent during the shutdown. Others tried to negotiate with creditors to get some relief. Unfortunately, many may have to face interest or fees because of non-payment, also impacting their budgets.

When people spend less, the economy feels it. Businesses bring in less money.  Less revenue impacts their profits and ability to pay their bills. Then, it just keeps trickling down. From one company and household to the next.

3. Delayed IPOs

A few high-profile IPOs were planned for the beginning of 2019, including Pinterest, Lyft, and Uber. However, when the government shutdown, the Securities and Exchange Commission (SEC) was only handling emergencies. All pending administrative proceedings were put on hold.

As a result, there was a delay in IPOs, which not only impacts those companies but also the potential investors and the stock market as a whole.

4. Airlines Lose Business

Airlines across the country all saw their pocketbooks becoming a little lighter thanks to the government shutdown. Since federal workers and contractors were mostly furloughed, they weren’t traveling. This resulted in fewer airline ticket purchases.

Similarly, some other travelers may have changed their plans because of the shutdown. Some TSA workers called in sick instead of working without pay, and security lines got substantially longer. Travelers may have decided it was better to delay their travel plans than contend with the nuisance. As air traffic controllers also began calling in sick, other potential passengers may have forgone their original itinerary based on fear as well.

5. Small Business Impact

The shutdown also did a number on small businesses around the country. Along with slower household spending, something that can affect a company of any size. Companies were unable to approve Small Business Administration loans. This may have caused a squeeze on small business owners who needed the money to maintain operations or go forward with a big project.

Similarly, microbreweries couldn’t get approvals of labels from the Alcohol and Tobacco Tax and Trade Bureau (TTB), hindering their ability to get new batches out for customers.

Ultimately, the government shutdown was hard on the economy. The examples above only skim the surface of the full impact, and the true nature of the damage may not be clear for months. Plus, if the government fails to strike a deal by mid-February, another shutdown could occur, making a tough situation potentially much worse.

How has the government shutdown affected you? Tell us about your experience in the comments below.

Read More:

• How the Government Shutdown Impacts Your Mortgage
• Will There Be More IRS Audits Under the New Tax Law?
• Government Jobs vs. Government Contractor Positions – Which is Best?

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