How does the US government shutdown affect the private sector?

As the US government shutdown grinds into its fourth week, it has the distinction of being the longest in American history.

What does it mean for American workers?

Of the 800,000 federal employees, half are furloughed without pay and the rest are working unpaid. While these are public employees, the absence of this workforce – and the funds they distribute to contractors – is having a ripple effect on the private sector.

In the fiscal year that ended October 1, the most recent data available show, the 13 government agencies affected by the shutdown were committed to pay $89.3 billion to contractors, or an average of $245 million per day, according to Bloomberg. The Department of Homeland Security, Nasa, and the State Department accounted for more than half of that.

Contractors – from security guards at airports to cancer researchers – are inextricably linked to the public sector. Four out of every 10 people who work for the federal government are private contractors, according to 2017 research by New York University professor Paul Light. Even government data used by developers, scientists and economists is unavailable, putting work on hold, reported The Washington post.

What is the outlook if the shutdown continues?

If the shutdown continues, it could dent the monthly jobs report. “If the government remains closed past January 19, then furloughed federal workers will not receive pay during the survey week, meaning that we’d very likely get a big drop in the headline payrolls report, something on the order of perhaps 500,000 to 600,000,” Omair Sharif, senior US economist at Societe Generale in New York, told Reuters.

It would be the first monthly decline in employment since September 2010, ending a streak of 99 straight months of job gains. While the shutdown has so far had a minor effect on the economy, if it continues, Moody’s Analytics forecasts the shutdown will slow economic growth nationally by about 0.04 percentage points for every week that it lasts, cutting into sales-tax revenues for states and cities. With budget uncertainty, states may slow the pace of work on infrastructure projects because they can’t say for sure how much they will get once the budget impasse ends.