Government shutdown could start to show in economic data

A prolonged government shutdown could have a negative impact on the U.S. economy, Federal Reserve Chairman Jerome Powell said Thursday.

“In the short term, government shutdowns don’t last very long. They typically have not left much a market on the economy, which isn’t to say there’s plenty of personal hardships that people undergo,” Powell said during a discussion Thursday at the Economic Club of Washington.

“A longer shutdown is something we haven’t had,” he added. If we have an extended shutdown, I do think that would show up in the data pretty clear.”

About a quarter of the federal government has been in a near-standstill since Dec. 22 due to a battle between President Donald Trump and congressional Democrats over funding for a wall at the southern border. Neither side has been willing to budge on the core issue, and workers could be about to miss their first paycheck because of the standoff.

If the shutdown isn’t resolved before Friday, it would tie for the longest — 21 days.

Powell said previous gaps have not lead to much damage “in the aggregate,” though this one could be different. He did not quantify how much the shutdown could shave off growth.

From the Fed’s own perspective, he said the central bank would be hampered by a lack of data it uses when formulating its economic outlook and, consequently, monetary policy. He mentioned the Department of Commerce specifically as being hamstrung in getting data on gross domestic product and retail sales, for example.

“We would have a less clear picture into the economy if it were to go on much longer,” Powell said.

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