U.S. Shutdown Risks More Than 750,000 Layoffs, Economic Impact Rises
The U.S. government is currently in its 21st shutdown in the past 50 years, with the current one posing unique risks due to President Trump's threat of mass layoffs. While the 2018-2019 shutdown had a minimal impact on the economy, this one could have more significant consequences.
The shutdown, which began on December 22, has already delayed the release of the crucial September jobs report. This report, scheduled for Friday, provides vital insights into the job market's health. The job market is already strained, with job creation slowing to an average of 53,000 per month since March, due to high interest rates and trade uncertainties.
President Trump, backed by the head of the US Office of Management and Budget, Russell Vought, has threatened a 'reduction in force.' This could eliminate thousands of federal worker positions, potentially causing long-term disruption. Unlike previous shutdowns, some agencies did not receive advance funding, which could lead to temporary layoffs for around 750,000 federal employees. Financial markets, however, remain unaffected, with investors assuming a quick resolution, as seen in past shutdowns.
The current shutdown could shave 0.1 to 0.2 percentage points from the nation's annual growth rate for each week the government is closed. With the economy showing mixed signals, including strong GDP growth in Q2 but slowing job creation and wage growth, the impact of this shutdown could be more significant than previous ones.
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