Recession warnings pile up as shutdown wraps up fourth week
The impasse is triggering alarms about an already fragile economic environment.
By BEN WHITE 01/17/2019 05:01 AM EST
The partial government shutdown was supposed to be a brief non-event for the economy. Now its starting to look like a serious crisis that could nudge the U.S. toward recession and threaten President Donald Trump's economic message during his reelection campaign.
Across Wall Street, analysts are rushing out warnings that missed federal paychecks, dormant government contractors and shelved corporate stock offerings could push first-quarter growth close to or even below zero if the shutdown, which is wrapping up its fourth week, drags on much longer.
Their broader fear: The protracted impasse could convince consumers and businesses that the federal government will spend all of 2019 on the brink of crisis whether on the border wall, trade with China or the debt limit. That could choke business investment and consumer spending, bringing an end to one of the longest economic expansions on record.
Recessions dont just happen, after all. They are usually triggered by largely unforeseen shocks to the system, like the tech over-investment and dot-com crash of the late 1990s or the credit crisis of 2008. The government shutdown is not there yet. But the longer it drags on, the closer it gets.
You can take the ruler out right now and calculate the exact impact from missed paychecks and contracts and you dont have to go many months to get to zero growth, said Torsten Slok, chief international economist at Deutsche Bank. But this is not just some linear event. It can get exponentially worse in very unpredictable ways, from government workers quitting, to strikes, to companies not going public. Its no longer just a political sideshow, its a real recession risk.
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https://www.politico.com/story/2019/01/17/government-shutdown-recession-economy-1092089