WSJ: Shutdown Pinches Economic Growth

Shutdown
This shutdown is not just hurting federal employees or government contractors or small businesses that operate near federal agencies. It is having a wide-ranging, negative impact on our economy and affecting Americans across the country. The Wall Street Journal walks through these impacts on local economies and businesses. TL;DR:
The lost output will, to this point, shave between a tenth and a quarter of a percentage point off the economy’s annual growth rate in the first quarter, private-sector economists said. J.P. Morgan projects gross domestic product to grow at a 2% pace this quarter, while Moody’s projects about 2.6% growth. Macroeconomic Advisers expects 1.6% growth.”

Key excerpts:
“A Vermont mead brewery has delayed a major expansion because the owners can’t get a business loan. A craft-burger joint in Utah has sent employees home because sales are down. And a Maryland Lyft driver has seen his weekly income fall by nearly half.”

“…On a more micro level, [the Trump shutdown] is showing signs of disrupting commerce as hundreds of thousands of federal workers missed out on their first payday of the closure late last week.”

“While the economic gashes aren’t enough to derail the recovery, now in its 10th year, they appear to be at least temporarily diminishing the vigor of an expansion that was already projected to slow in 2019. Output is now expected to grow at a 2.2% pace in the first quarter, less than an estimated 3.1% growth recorded in 2018, economists surveyed by The Wall Street Journal projected earlier this month. Those first-quarter estimates—down slightly from prior ones before the shutdown—will likely slip further as the shutdown continues. It enters its 24th day Monday.

“At Groennfell Meadery in Colchester, Vt., owners Kelly and Ricky Klein were set to have a $1.3 million loan approved by the U.S. Small Business Administration when their loan officer emailed them several weeks ago saying the deal was on hold because of the shutdown.”

“Without the loan, they can’t pick up three 2,000-gallon, stainless-steel fermenter tanks in Boston and make their planned move to a bigger facility that will allow them to double their production. Instead, they have been dipping into stockpiles of mead—an alcoholic beverage made from fermented honey—to fulfill orders from customers around the Northeast.”

“‘We’re in a holding pattern,’ Ricky Klein said. He has been trying to find other tasks for his new hires so he doesn’t have to cut back their hours.”

“Economists estimate the furlough of 380,000 federal workers—meaning they take unpaid leave—costs $1 billion to $2 billion a week in lost economic output. That is a rounding error in an economy that produces about $20 trillion in goods and services a year, but it accumulates over time. An additional 420,000 federal workers, deemed ‘essential,’ are working without pay.”

The lost output will, to this point, shave between a tenth and a quarter of a percentage point off the economy’s annual growth rate in the first quarter, private-sector economists said. J.P. Morgan projects gross domestic product to grow at a 2% pace this quarter, while Moody’s projects about 2.6% growth. Macroeconomic Advisers expects 1.6% growth.”

“In Washington, D.C., Matt Gillette is earning about $50 to $80 a day driving for ride-sharing app Lyft, about half what he was earning before the shutdown. The 33-year-old Maryland resident said fewer tourists are visiting sites like the Smithsonian museums, which are closed, while furloughed federal workers are tightening their spending.”

Mr. Gillette said he is worried about missing his rent this month.”
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