US government shutdown starting to affect economy

The longest US government shutdown is putting a strain on the economy.

US flag during government shutdown Source: Bloomberg

The US government shutdown is starting to impact the overall US economy. The federal government estimates that the shutdown is already costing the US $50 million a day. The longest government stoppage in history is having a negative effect throughout the nation.

How government workers can impact unemployment figures

US President, Donald Trump, and the US Congress are still at odds about how to fund the government. While they’re battling about whether to fund a border wall for $5 billion, many workers are caught in the middle. With many government workers being furloughed, they are turning to the unemployment line. After surviving for a month without pay, many are filing for unemployment benefits. John Woodson, a federal contractor, is seeking compensation as a last resort.

‘We should still be at work right now. Politicians should handle this — don't put this on the citizens. You're hurting us,’ said Woodson.

The increase in thousands of workers filing for unemployment could hurt future jobs reports. Investors could be scared by a declining report and lead to stagnation in the economy.

How the shutdown can affect labor market

In addition to federal workers filing for employment, many are looking on job search sites for new jobs as well. With many employers hiring, the federal government could lose many talented workers if the government shutdown drags on, according to Martha Gimbel, Indeed’s director of economic research.

‘With the shutdown occurring in a tight labor market, many workers have other options, and they seem to be trying to take advantage of them.If the shutdown leads to a loss of talent for the federal government, it could be harder for it to compete for new hires in a labor market this tight,’ said Gimbel.

Can the US economy survive the government shutdown?

The economy is already volatile, and a prolonged government shutdown can lead to an economic downturn.

‘The economy could easily stall in the first quarter, and then the question is what happens in the second. The longer it goes on, the longer it takes to recover,’ said Ian Shepherdson, chief economist at Pantheon Macroeconomics.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

See an opportunity to trade?

Go long or short on more than 16,000 markets with IG.

Spread bet and trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Bid
Offer
-
-
China 300
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.