Economist: Government shutdown is over, but damage is done

January 29, 2019

OMAHA - While the longest federal government shutdown in U.S. history ended late Friday after 35 days, an Omaha economist says growth is already slowing and we may be headed for a significant downturn later this year or early in 2020.

Ernie Goss, an economics professor at Creighton University, says the housing industry is “soft” and trade tensions with China are hurting exports, so the downshift will eventually hit the gross domestic product, or GDP, even with federal employees now going back to work.

“There have been a lot of economists saying it would not have an impact on GDP,” Goss says. “Well, I’m here to say it will have an impact on GDP, particularly, the length of this particular shutdown.”

For most states, federal employees make up about one-and-a-half percent of the workforce and about the same amount of the GDP.

“We’re talking about 800,000 workers directly, but the real key here is the indirect impacts and that would be in the private sector,” Goss says. “As we move along, we’ll see those impacts grow.”

Agricultural states like Nebraska have already been feeling the effects of the trade troubles with China, and the prolonged federal government shutdown didn’t help matters.

“Farming is front and center to this,” Goss says. “A lot of the trade impacts have been in food and food production, and of course, that’s central to this part of the country. For example: the farm support payments, those have been in jeopardy and farm loans.”

Many farmers who are planning for the spring planting season ahead are wrestling with finances in the uncertain marketplace. Plus, significant statistical information isn’t available from the mostly-closed-USDA to help strategize spring crops.

While there’s never a good time for an economic hiccup or slowdown, Goss says this was “an exceptionally bad time.” He notes, we tend to judge government shutdowns by past shutdowns.

“Most of the past shutdowns have all been shorter and they’ve not had a long-term impact,” Goss says. “This one could be different to the extent that it goes on longer, to the extent that it’s happening at a very inopportune time, if there’s ever a good time.”

The last significant government shutdown for 16 days in October of 2013 showed negative GDP growth in the first quarter of 2014. Goss also points to indirect impacts in the private sector as a ripple effect, saying for every one job pullback in the federal government, there will likely be one more job lost in the private sector.

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