For all the political firestorms they generate, government shutdowns have been nonevents for both markets and the economy.
For all the political firestorms they generate, government shutdowns historically have been nonevents for both markets and the economy.
This time, though, could be different.
That’s because President Donald Trump’s threat to make some federal government furloughs resulting from the shutdown permanent could have longer-lasting impacts on an employment picture that already has been looking precarious.
Should Trump follow through on the threat — and successfully weather what almost certainly would be yet another court challenge to his executive authority — it throws a wrench into what otherwise have been much more political than economic events.
«We have reason to think that a shutdown this time may not follow past precedent», Michael McLean, public policy senior analyst at Barclays, said in a client note. If Trump follows through, «this would be a significant departure from past practice and could inject new uncertainty into the economic effect of a shutdown, which otherwise we would expect to be marginal.»
Indeed, shutdowns in the past have left little mark other than the political damage done to the party perceived as at fault.
Markets have sold off on occasion but then quickly recovered. For growth, most economists calculate the impact as about 0.1 percentage point off gross domestic product for week.
