Shut­down holds up abil­ity to gauge sting

Folks who work on eco­nomic re­ports are not work­ing

Baltimore Sun - - NATION & WORLD - By Christo­pher Ru­gaber

WASH­ING­TON — The par­tial shut­down of the fed­eral gov­ern­ment has be­gun to make it harder to as­sess the health of the econ­omy by de­lay­ing or dis­tort­ing key re­ports on growth, spend­ing and hir­ing.

Gov­ern­ment data on home con­struc­tion and re­tail sales, for ex­am­ple, won’t be re­leased next week be­cause staffers who com­pile those re­ports have been fur­loughed. The re­tail sales re­port pro­vides a snap­shot of con­sumer spend­ing, which fuels more than twothirds of the econ­omy.

With Macy’s and Kohl’s hav­ing said Thurs­day that their hol­i­day sales were weaker than ex­pected, a broader gauge of re­tail spend­ing would have pro­vided clar­ity.

In ad­di­tion, the next re­port on the econ­omy’s over­all growth, set for Jan. 30, won’t be re­leased if the shut­down remains in ef­fect. Even if the gov­ern­ment has fully re­opened by then, fed­eral work­ers won’t likely have had enough time to pro­duce the sched­uled re- port on the na­tion’s gross do­mes­tic prod­uct.

Not all agen­cies are closed.

Congress ap­proved fund­ing last year for the La­bor Depart­ment, so the gov­ern­ment’s next monthly jobs re­port will be re­leased as sched­uled Feb. 1. But it’s un­clear how long the depart­ment will be able to is­sue jobs re­ports — the most closely watched barom­e­ter of the econ­omy — af­ter that.

Though the econ­omy re- mains healthy in most re­spects, there are ris­ing con­cerns that growth could slow or stall in com­ing months. The trade war be­tween the U.S. and China, which has helped de­press global growth, is likely slow­ing busi­ness in­vest­ment. The stim­u­lus from the Trump ad­min­is­tra­tion’s tax cuts is ex­pected to fade.

And bor­row­ing costs have risen since the Fed­eral Re­serve raised short-term in­ter­est rates four times last year. Be­fore re­bound­ing this week, stock mar­kets had plum­meted roughly 16 per­cent from their peak Oct. 2.

Many economists in­creas­ingly see the shut­down, should it per­sist, as a drag on the econ­omy.

Michael Feroli of J.P. Morgan has downgraded his fore­cast for growth in the first three months of 2019 be­cause of the shut­down. He now ex­pects the econ­omy to grow at a 2 per­cent an­nual rate, down from his pre­vi­ous es­ti­mate of 2.25 per­cent.

The shut­down is cost­ing the econ­omy about $1.2 bil­lion a week, ac­cord­ing to Stan­dard & Poor’s. Some of that loss will be re­gained af­ter fed­eral work­ers even­tu­ally re­ceive back pay for the time they missed. But many gov­ern­ment con­trac­tors won’t be made whole. And lost busi­ness — such as sched­uled ho­tel stays from trips to na­tional parks that won’t be taken — may not be made up.

Fed of­fi­cials are now stress­ing their flex­i­bil­ity on rate hikes, em­pha­siz­ing that they will be pa­tient and their pol­icy “data de­pen­dent.” By this, the Fed means that the gov­ern­ment’s lat­est read­ings on hir­ing, in­fla­tion and growth will fac­tor heav­ily in its rate de­ci­sions. Yet much of that data will now be un­avail­able — to the Fed or any­one else.

Even some re­ports that are re­leased on sched­ule are likely to be dis­torted by the shut­down. For ex­am­ple, the Jan­uary jobs re­port may show an ar­ti­fi­cially high un­em­ploy­ment rate and low em­ploy­ment fig­ure. That’s be­cause up to 380,000 fed­eral em­ploy­ees whoaren’t work­ing or be­ing paid dur­ing the shut­down — but who will re­turn to work af­ter­ward — could be counted as un­em­ployed for Jan­uary.

If so, that would raise the un­em­ploy­ment rate by 0.2 per­cent­age point, es­ti­mated Ben Her­zon, an econ­o­mist at Macroe­co­nomic Ad­vis­ers, a fore­cast­ing firm. And the monthly job count could de­cline by 380,000 if the shut­down con­tin­ues through the end of Jan­uary.

If all fed­eral work­ers re­ceive back pay, then the Jan­uary jobs re­port would later be re­vised to re­store those 380,000 jobs, ac­cord­ing to the La­bor Depart­ment’s Bu­reau of La­bor Sta­tis­tics.


Fed­eral work­ers and union mem­bers rally Thurs­day in Minneapolis amid the fed­eral shut­down, which be­gan Dec. 22.

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