A Dubious Honor By: Gabriel PotterMBA, AIFA® 2019.01.14

This weekend, the shutdown over the proposed border wall became the longest Federal shutdown in history. 

…We’re number one?  Hooray? 

This is not a good thing.  But we still are unsure of how bad it really is.   

A few weeks ago, we suggested using an estimated loss of GDP growth per week that, in retrospect, is probably too high.  Nobody is sure if GDP has pulled back due to natural slowdown, psychological effects, expiration of the tax-cut impact, or actual loss of dollars moving towards economic activity.  Thus, more financial firms are using direct dollar impacts instead of GDP ratios to evaluate the damage.  SP Global, for instance, estimates that a shutdown running into January would cost $6 billion of lost output.  Similar estimates suggest about $1 billion dollars of economic loss per week.    Fitch has warned downgrading US government paper if the shutdown persists.  However, a loss of dollar output or credit ratings still feels arbitrary to the average citizen; perhaps a better way to consider the impact is unemployment, which is “likely to be boosted by 0.2%” this month according to Ben Herzon at Macroeconomic Advisers. 

The ultimate determination of how bad the shutdown is (or was) will be calculated by the Department of Commerce.   The great irony is that the Department of Commerce is closed due to the shutdown. 

 

 

 

 

 

 

 

 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

More about Gabriel Potter
Sign up for our Newsletter
Sign up for our Newsletter