Record government shutdown, US economy loses 11 billion USD

Photo caption — US Congress headquarters in Washington, DC Photo: THX/TTXVN

The longest federal government shutdown in US history appears to be coming to an end, but not without leaving its mark on an already struggling economy .

About 1.25 million federal workers have not been paid since October 1, according to the AP. Thousands of flights have been canceled, a trend expected to continue this week even as Congress moves to reopen the government . Some recipients of food aid have had their benefits interrupted.

Most of the lost economic activity will be recovered when the government reopens, as federal workers are paid. But some canceled flights won't be rebooked, missed meals won't be reimbursed, and some delayed purchases won't happen.

“Short-term lockdowns are often overlooked in the data, but this one will leave a lasting mark, given the record length of closures and the growing disruption to welfare and mobility programs,” said Gregory Daco, chief economist at accounting firm EY.

The Congressional Budget Office (CBO) estimates that a six-week government shutdown would reduce growth in the fourth quarter of this year by about 1.5 percentage points. This would cut growth in half compared to the third quarter. The CBO predicts that reopening would boost first-quarter growth by 2.2 percentage points next year, but about $11 billion in economic activity would be lost permanently.

The previous longest government shutdown, in 2018-2019, lasted 35 days but only partially shut down the government because many agencies were fully funded. The CBO said at the time that it only shaved about 0.02% off the economy's GDP.

The current shutdown is adding to the economy's existing challenges, including sluggish employment, rising inflation and President Donald Trump's tariffs, which have created uncertainty for many businesses. However, few economists are predicting a recession.

About 650,000 federal workers were not working during the shutdown, which likely increased the unemployment rate by about 0.4 percentage point in October, or to 4.7% from 4.3% in August, when the last report was released. All those workers will then be counted as employed when the government reopens.

In total, the CBO estimates that federal workers will lose about $16 billion in wages through mid-November. This means less spending at stores and restaurants and less ability to travel during the holiday season. Big purchases will likely be postponed, slowing the economy overall.

During the government shutdown, President Trump threatened to withhold back pay, but a deal reached in Congress will cover lost wages when the government reopens.

Airlines had canceled more than 2,000 flights by the evening of November 10, adding to 5,500 cancellations since November 7 under orders from the Federal Aviation Administration, which is looking to ease the burden on overworked air traffic controllers who have already missed two pay periods.

Even before the flights were canceled, Tourism Economics, an economic consultancy, estimated that the shutdown would reduce tourist spending by $63 million a day, meaning a six-week stalemate would cost the tourism industry $2.6 billion.

Canceled flights also mean fewer customers for hotels, restaurants, and taxi drivers. Federal workers have canceled upcoming trips and may not be able to reschedule even when the government reopens, according to Tourism Economics.

The government shutdown has cut off the flow of economic data on unemployment, inflation and retail spending that the Federal Reserve relies on to monitor the health of the economy. Even when the government reopens, some of that data will be delayed. As a result, the Fed is unlikely to deliver a third rate cut at its December meeting, which many expected before the shutdown.

Source: https://baolamdong.vn/chinh-phu-dong-cua-ky-luc-kinh-te-my-thiet-hai-11-ty-usd-402491.html