Fed Chair: Ex­tended shut­down could harm econ­omy

Lodi News-Sentinel - - BUSINESS - By Jim Puz­zanghera

WASH­ING­TON — Fed­eral Re­serve Chair­man Jerome H. Pow­ell warned on Thurs­day that an ex­tended par­tial gov­ern­ment shut­down could dam­age the U.S. econ­omy and starve the cen­tral bank of key data it needs to make mon­e­tary pol­icy de­ci­sions.

“If we have an ex­tended shut­down, I do think that would show up in the data pretty clearly,” Pow­ell said dur­ing an ap­pear­ance at the Eco­nomic Club of Wash­ing­ton.

About one-quar­ter of the fed­eral gov­ern­ment has been shut down since Dec. 22 be­cause of a dis­pute over $5.7 bil­lion in fund­ing Pres­i­dent Trump is seek­ing from Congress to build a wall on the U.S. bor­der with Mex­ico.

The dis­pute is show­ing no signs of end­ing after Trump walked out of a Wed­nes­day ne­go­ti­at­ing ses­sion with law­mak­ers after Demo­cratic lead­ers would not agree to his de­mand for the wall fund­ing.

Pow­ell said past gov­ern­ment shut­downs had not caused se­ri­ous eco­nomic dam­age be­cause they didn’t last long.

“If gov­ern­ment shut­downs don’t last very long, they have typ­i­cally not left much of a mark on the econ­omy,” he said. “There’s plenty of per­sonal hard­ship that peo­ple un­dergo, but the ag­gre­gate level of the econ­omy gen­er­ally doesn’t re­flect much dam­age.”

About 800,000 fed­eral work­ers are af­fected by the shut­down, and many will miss their first pay­checks on Fri­day.

But a longer shut­down would start to cause dam­age to the econ­omy. Mark Zandi, chief econ­o­mist at Moody’s An­a­lyt­ics, has pre­dicted that a par­tial shut­down that lasts through the end of this month would shave from one-tenth to two-tenths of a per­cent­age point from to­tal first-quar­ter eco­nomic growth.

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