Economists Don't Expect To See Lasting Fallout From Shutdown, So Long As It Ends Soon The partial government shutdown is not expected to cause lasting economic damage, unless it drags on. But forecasters are expecting slower growth for the U.S. economy in the new year.
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Economists Don't Expect To See Lasting Fallout From Shutdown, So Long As It Ends Soon

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Economists Don't Expect To See Lasting Fallout From Shutdown, So Long As It Ends Soon

Economists Don't Expect To See Lasting Fallout From Shutdown, So Long As It Ends Soon

Economists Don't Expect To See Lasting Fallout From Shutdown, So Long As It Ends Soon

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The partial government shutdown is not expected to cause lasting economic damage, unless it drags on. But forecasters are expecting slower growth for the U.S. economy in the new year.

MARY LOUISE KELLY, HOST:

Federal workers around the country who aren't getting paid are watching their spending, and that is having an impact on businesses that cater to those workers. Economists don't expect to see long-lasting fallout so long as the shutdown ends soon, but the U.S. was already facing an economic slowdown, as NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Two Sisters Deli in downtown Washington ordinarily does a brisk business selling breakfast muffins and deli sandwiches to workers from the nearby federal agencies but not this week.

HEEJIN KIM: Empty, empty.

HORSLEY: Manager Heejin Kim got more bad news today when the Smithsonian's popular Air and Space Museum shuttered its doors a block away.

KIM: Oh, my God, not even half business, not even half a sale because there's no tourists, either.

HORSLEY: Even though there's little traffic, Kim's reluctant to cut back on staff. She knows her workers have their own bills to pay. Museums will reopen when the shutdown ends, and federal workers will be back on the job. But they aren't likely to make up for all the meals and Metro rides they missed during the shutdown. Some of that money is gone for good, but it's not enough to derail a $20 trillion economy.

NARIMAN BEHRAVESH: This is tiny.

HORSLEY: Nariman Behravesh is chief economist for the forecasting firm IHS Markit.

BEHRAVESH: The economic impact is going to be fairly small. Now, obviously there's a big political to-do about this having to do with a wall and so forth. But the economic impacts will be barely noticeable.

HORSLEY: But even before the shutdown, economists had noticed a slowdown in U.S. economic growth from an annual rate of more than 4 percent in the second quarter of last year to somewhere around 3 percent in the quarter that just ended. Behravesh expects that gradual slowdown will continue in 2019 and beyond as the effects of the GOP tax cut and increased government spending wear off.

BEHRAVESH: We think the potency, if you will, of the stimulus is beginning to fade a little bit, but we still expect decent growth. By 2020, we've got growth all the way back down, a trend of around 2 percent, maybe even a little lower because the stimulus is gone at that point.

HORSLEY: Many private economists share that cautious view. Goldman Sachs just revised its forecast for economic growth in the coming year down to 2 percent or less. The Trump administration's forecast is a good deal rosier. White House economist Kevin Hassett expects growth to hold steady at around 3 percent in the coming year.

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KEVIN HASSETT: All the anecdotal information we're getting is that the fundamentals remain extremely sound, that Christmas sales are through the roof. GDP in the fourth quarter is looking like it's going to be very close to, if not above three again.

HORSLEY: Unemployment is low, and wages are rising, but consumer confidence took a hit last month as the stock market wrapped up its worst year in a decade. Administration officials boast the U.S. is still outperforming much of the rest of the world, but David Dollar of the Brookings Institution warns ripple effects from slower growth overseas could eventually wash ashore in this country.

DAVID DOLLAR: We're living in a world where if China seriously slows down, that's going to have a big effect on literally more than a hundred different economies. And then of course that affects the whole world.

HORSLEY: Growth in China is slowing partly as a result of deliberate policies in Beijing but also as a result of the U.S. trade war. The administration is threatening to impose even-bigger tariffs on Chinese imports if no agreement's reached in the next couple of months. Dollar says the fallout is hard to predict.

DOLLAR: That's where a lot of the market uncertainty comes from. You could imagine an escalating trade war, or you could imagine a big announced deal between the U.S. and China that would be good for global growth and that would be calming for markets.

HORSLEY: The U.S. trade deficit has been rising despite Trump's tariffs, but the magnitude is not clear. Trade data from November was supposed to come out last week, but it was delayed by the government shutdown. Scott Horsley, NPR News, Washington.

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