With bipartisan congressional talks to end the U.S. government shutdown bogging down on Friday, the hit to the national economy is growing, experts said.
“Even if there is a reopening of the government in the next couple of weeks, you’re going to see a visible and permanent loss of economic activity as a result of the government shutdown,” Greg Daco, chief economist at consulting firm EY-Parthenon, told CBS News.
Estimates of the economic impact range from $7 billion to $16 billion per week, with the White House’s Council of Economic Advisers, a U.S. government agency, forecasting a weekly loss of $15 billion. A recent CBS News poll found that 54% of Americans said they are “very concerned” about how the shutdown is affecting the economy.
Here’s where the shutdown, now on Day 38, is hitting the economy hardest.
Federal workers
Hundreds of thousands of government employees are going without pay during the shutdown, forcing many to take out loans or seek out temporary jobs to make ends meet.
The Bipartisan Policy Center, a Washington, D.C.-based think tank, estimates that at least 670,000 federal workers are furloughed and roughly 730,000 are working without pay.
The Congressional Budget Office, a nonpartisan federal agency that provides analysis to lawmakers, said in a letter last month that the reduction in hours worked by furloughed federal employees alone could end up costing the economy $14 billion by year-end if the shutdown stretches to Thanksgiving.
Although government workers are expected to receive back pay once the stalemate ends, some employees are likely to start to pull back on spending, which could ripple through the economy, said Mark Zandi, chief economist at financial research firm Moody’s Analytics.
Consumers
The interruption in food-stamp benefits during the shutdown for the more than 40 million Americans enrolled in the Supplemental Nutrition Assistance Program is also temporarily sapping consumer spending, Zandi said.
Spending could soon rebound after a federal judge ordered the Trump administration to provide full federal benefits to states by Friday. Still, the suspension of food stamps comes as many low- and middle-income Americans face other financial strains, including a spike in Affordable Care Act health insurance rates.
“There’s all kinds of funding that’s not getting paid out, and that will impact the ability and willingness of these households to spend,” Zandi said.
Small businesses
One key sector of the economy feeling the pinch is small businesses, many of which rely on government loans and business from federal agencies to stay afloat.
For example, the shutdown is preventing the Small Business Administration from distributing $170 million in federally guaranteed loans per day to hundreds of smaller employers, an agency spokesperson told CBS News. As of Wednesday, that amounted to a total loss of $4.5 billion in capital for more than 8,300 small businesses, according to SBA.
Federal contractors
The government employs millions of contract workers in custodial, information technology and other roles. However, that activity has stopped during the shutdown, depriving many private businesses of revenue.
Grace Zwemmer, an associate economist at Oxford Economics, said the investment advisory firm estimates that roughly $800 million in federal awards are at risk of disruption each week the shutdown drags on. Around 5.2 million federal contractor workers stand to be impacted, according to unofficial estimates, she added.
“A prolonged shutdown could significantly impact these individuals by impacting the cash flow for the contractors, potentially leading to furloughs, pay cuts or layoffs, with the risks greater for small business contractors,” Zwemmer said.
An Oxford Economics report this week noted that recent jobless claims data point to a rise in private-sector layoffs in states most exposed to the shutdown.
Travel companies
The travel industry is feeling the impact after the Federal Aviation Administration ordered airlines to cut thousands of flights across the U.S. starting Friday.
As of Wednesday, the industry had already lost roughly $5 billion in travel spending, according to Erik Hansen, head of government relations at the U.S. Travel Association.
“The timing couldn’t be worse-just weeks before the busiest travel period of the year,” he said.
Economic growth
Overall, the government shutdown is expected to take a toll on U.S. gross domestic product, the total output of goods and services.
The CBO estimates that the drag on economic activity from the government closure will reduce annualized GDP growth in the final three months of the year by 1 to 2 percentage points, depending on how long the shutdown lasts.
While economists expect most of the decline in growth to be recovered when the government reopens and as spending and commercial activity ramp back up, the CBO forecasts a permanent economic loss of $7 billion to $14 billion. Still, that is a tiny fraction of the $30 trillion economy.
