As of 22 local time, the U.S. government has suspended the full moon. This full moon clouds Washington, Capitol Hill, businesses and capital markets.
At the beginning of the U.S. government shutdown last month, most people thought it had little impact on the U.S. economy, but now it is not. Some analysts believe that the marathon-style government shutdown has had an irreversible impact on the U.S. economy.
In a recent study, Beth Ann Bovino, S&Ps chief economist, predicted that even if the U.S. government reopened this weekend, the shutdown would cost the economy about $6 billion. Bovino told First Financial Journalist: The longer the government shuts down, the greater the impact. As the damage to industry and consumers expands and deepens, the cost of an average weekly shutdown is expected to increase.
Goldman Sachs wrote in its research report to clients that the U.S. government lockout has once again highlighted the political failure of the United States, raising concerns among investors about whether the debt ceiling issue later this year will lead to a renewed bickering between donkeys and elephants.
Economic impact is irreversible
Bovino said the average weekly direct and indirect costs of some U.S. government shutdowns, which began on December 22, now total $1.2 billion. U.S. President Trump asked Congress to allocate $5.7 billion to build the U.S. -Mexico border wall, estimating that the damage to the U.S. economy caused by the governments one-month suspension would exceed the cost of building the wall.
Gregory Daco, chief U.S. economist at the Oxford Institute of Economics, told First Financial Journalist: In the fifth week, the losses caused by the government shutdown are estimated to exceed $700 million a week. Once the government shutdown ends in January, GDP will lose 0.2% in the first quarter of the year, and we will also reduce the annual growth rate of GDP to 1.9%. The longer the stoppage, the greater the impact.
Since the government shutdown on December 22, 800,000 U.S. federal employees and contract workers working for the federal government have not been paid. Although Trump signed a bill guaranteeing that when the government reopened, it would reimburse federal employees with unpaid wages during the lockout, contract workerswage losses were not guaranteed.
According to a statement from the U.S. Department of Labor, government employees who do not receive wages are still employed at the time of employment statistics and cannot apply for unemployment benefits. This has seriously affected the lives of federal employees who do not have enough savings. At present, many charities in Washington, D.C., are offering free food to federal employees affected by the governments suspension. Former U.S. President George W. Bush also paid for pizza for federal agents who defended him unpaid.
As with previous government stalls, the lost productivity of government workers will never be restored, Bovino said. The U.S. government, which has been shut down for a month, is unable to quickly clean up the backlog with its payroll. The economic impact of government suspension sequelae, such as document backlog and slow approval, is much longer than that of wage losses. Although the exact impact has not been calculated, there are precedents in history. The U.S. Bureau of Economic Analysis estimates that the U.S. government shut down for 16 days in October 2013, when losses from the shutdown of federal employees reduced gross domestic product by 0.3 percentage points in the fourth quarter of the year.
Multiple industries affected
The impact of the U.S. government lockout is becoming more and more serious, not only because federal employees are unable to receive wages, but also because of the long-term absence of government functions.
The American Chamber of Commerce, the largest business association in the United States, last week urged Trump and Congress to end the government lockout. Neil L. Bradley, the associations chief policy officer, wrote in a letter on the 22nd that the consequences of the governments suspension were widespread and growing, listing various affected projects, data and government functions.
Small businesses cant get help from the Small Business Administration. The company was unable to raise additional funds because of delayed listing procedures. M&A review was suspended. From the manufacturer to the brewer, it is impossible to receive the license required by law to sell the product. Import processing has been hampered and tariff exemption requirements have not been addressed, he wrote. Security inspectors worked unpaid, mortgage approval was delayed and research stopped. National parks are closed and garbage is not collected.
The National Association of Real Estate Intermediaries (NAR) warned that property, defined as flood-prone areas, could not be traded because of the governments suspension. According to U.S. law, the purchase of a property defined as a flood-prone area must be preceded by the purchase of flood insurance. Flood insurance in the United States usually does not cover flood losses, while only the Federal Emergency Management Agency (FEMA) provides flood insurance. During the government shutdown, the Federal Emergency Management Agency (FEMA) only deals with emergencies and does not deal with flood insurance. Therefore, if you want to buy a hydrophilic house with yacht terminal, even if you have signed a contract, you can not complete the transfer, you can only wait for the government to open the door.
The approval of new drugs stopped with the suspension of the Food and Drug Administration (FDA), and the transfer of property could not be completed because of the inability to buy flood insurance and so on. Its very difficult to estimate specific losses from these impacts, Bovino said.
Attacking Market Confidence
For investors, although the impact of the governments suspension on the U.S. economy does not seem obvious, they are more concerned that the U.S. donkey, like a bipartisan game, will make the U.S. political idle, thus bringing a worse economic outlook for the United States.
Goldman Sachs wrote in its research report to clients: The U.S. governments halt, though only slightly slowing growth itself, has once again highlighted the political failure of the United States and raised concerns about whether the debt ceiling will cause a protracted struggle later this year, which may have a greater impact on financial conditions and growth.
The University of Michigan Consumer Confidence Index, released on Friday, showed a 7.7% ring-to-ring decline, and the index reflecting consumer confidence in future expectations showed a 10% ring-to-ring decline.
I have to admit that the impact of the last U.S. government lockout on the U.S. stock market is negligible. But this government shutdown comes at a time when investors have doubts about the health of the U.S. economic outlook. The market fears that the governments suspension is increasingly likely to have more impact than people expected, from a small impact on the economy to a squeeze on economic activity, Dako said.
Nevertheless, there is a glimmer of dawn for federal government workers in Washington, D.C., who stand in a cold wind of less than 0 degrees to receive food relief.
On February 24, the U.S. Senate will vote on the Senate version of the budget and the budget passed by the House of Representatives, which will provide financial support to the government without repairing the border wall until February 8.
The result of the vote will directly determine whether federal workers will be paid by the end of this month. In the United States, wages are usually paid at the middle and end of the month. Since the shutdown of the U.S. government, these employees have returned empty-handed on two pay days. However, the Republican-controlled Senate budget must be approved by the Democratic-controlled House of Representatives before it can reach Trump.
Source of this article: Shi Jianle_NBJ11331, Responsible Editor of the First Finance and Economics Network