Shutdown ripples through economy Businesses, households, travelers feel the sting
WASHINGTON — Delta Air Lines can’t get eight new aircraft in the air. Roughly a million government employees and contractors aren’t being paid. Some Americans who are trying to start small businesses face delays in obtaining the required tax identification number from the IRS.
As the partial government shutdown moves through its fourth week with no end in sight, the economic blow is being felt not only by federal workers but also by business people, households and travelers across the country. And while the hit to the overall economy so far remains slight, economists foresee real damage if the shutdown drags into February or beyond.
“Even if the shutdown is over by the end of the month, the hit to growth will be material,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a research note.
Shepherdson projects that after growing for nearly 10 years, the economy might even contract in this year’s first quarter if the shutdown lasts through March. Other forecasts are less dire.
On Tuesday, Kevin Hassett, a top economist in the White House, acknowledged that the shutdown was weighing on the economy more than he had previously estimated. Hassett, chairman of the Council of Economic Advisers, said the White House now calculates that annual growth is slowing by about 0.1 percentage point a week.
The shutdown is rippling through the economy in ways that are not always visible, making it hard to fully assess its consequences. Complicating the task is that much of the economic data the government normally provides — from retail sales to home construction to the nation’s gross domestic product — has been suspended because the agencies that compile it remain closed.
With national parks shut down and some travelers suffering through long security lines and in some cases partial airport closures, for example, many
Americans are having to decide whether to cancel travel and vacation plans.
Some companies are pointing to specific problems: Delta said Tuesday that the shutdown is costing it $25 million a month in government travel. Its CEO, Edward Bastian, said that with the Federal Aviation Administration partially closed, Delta will also likely delay the start date of eight new aircraft.
For small companies, too, the effects are increasingly being felt. Edward Farrer, an executive at Principal Manufacturing Corp., a manufacturer in Broadview, Illinois, said that when the shutdown took effect, his company had nearly won approval for a request to the Commerce Department to import specialty steel from Europe free of U.S. tariffs. Commerce is among the now-closed government departments.
“We think we’d got it to the goal line and were waiting for an approval, but everything is at an impasse because of the shutdown,” Farrer said.
For now, Farrer says Principal is paying the tariffs, which typically cost the company tens of thousands of dollars a month. It wants to keep doing the work, so it is eating the cost, Farrer said. “But we can’t do it forever.”