Here's how lost furloughed federal worker paychecks could weigh on the US economy

Here's how lost furloughed federal worker paychecks could weigh on the US economy

Federal workers furloughed by the ongoing partial government shutdown have been bearing the brunt of the political standoff between President Donald Trump and Congress over funding for a border wall.

Those federal employees are feeling the squeeze on their wallets. As the stalemate drags into its third week, the impact may soon be felt by the wider U.S. economy.

The shutdown, which entered its 21st day Friday, began after Trump and Congress failed to pass a spending bill over the president’s demand for $5.7 billion in funds for a border wall.

If it continues into Saturday, the shutdown would become the longest on record. In November 1995, a budget standoff between President Bill Clinton and House Speaker Newt Gingrich produced a five-day shutdown that ended when Congress passed a temporary spending bill. But the underlying disagreement remained unresolved, prompting a second shutdown that lasted 21 days. The final budget compromise included modest spending cuts and tax increases.

The impact of the latest shutdown is already being felt by more than 800,000 furloughed workers, who were supposed to be paid Friday and will not receive paychecks covering the past two weeks.

That represents a loss of more than $2.2 billion in consumer spending by workers from a wide range of government agencies, according to data from the Center for American Progress — a setback for the economy and for Trump, who has taken credit for the country’s economic growth and low unemployment rate.

The long-term impact on the labor market is also difficult to estimate. But in the short run, some states would be hit much harder than others, based on the Center for American Progress estimates of the number of federal workers in each state who have been furloughed and are not reporting to work.

If all of those workers were classified as unemployed, Washington, D.C.’s unemployment rate would climb to a staggering 25 percent in January as a result of the shutdown, a 19.5 percent increase from November levels, according to CNBC calculations.

States far from the nation’s capitol would also feel the impact. Alaska’s unemployment rate would rise 1.5 percent due to furloughed workers, while Wyoming and Montana would each feel a 1 percent increase. (State level calculations are based on November 2018 BLS statistics, the latest available data.)

Before the government shutdown began, administration officials showed signs of worry about its economic impact.

Last month, Kevin Hassett, chairman of the Council of Economic Advisers, told CNBC, “Economically it is not something that really has a big long-run effect, but for sure if we had a long government shutdown then it might show up in the jobs report.”

While the president has taken to calling the situation at the southern border a “humanitarian crisis” in order to persuade Congress to approve border wall funding and end the shutdown, congressional Democrats have highlighted the plight of workers.

“[Trump] has chosen a wall over workers,” House Speaker Nancy Pelosi said when addressing furloughed employees on Wednesday.

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