Friday Economic Snapshot: 850,000 federal workers take mandatory time off
Here comes the big economic slowdown that, hopefully, doesn’t become something worse. Government uncertainty has been impacting economic growth for some time now, but its effects appear set to grow with the elevated chaos in Washington.
This week’s economic indicators are mixed: auto sales slowed for the first time in years, national office vacancy rates declined, the Dow Jones Industrial Average erased more than 600 points in the last 10 days, private employment increased an estimated 166,000 and mortgage applications decreased slightly.
Amid both good and bad news, menacing clouds have moved a bit closer. Let’s take a look at this week’s economic news.
This year’s September had two fewer selling days than 2012 did thanks to where Labor Day landed, but it still sends a shiver down industry watchers’ spines to see auto sales decline for the first time in 27 months. The month’s sales fell 4.2 percent, which is enough to raise eyebrows rather than cause panic.
Ford and Chrysler posted small increases, but much of the industry saw its sales take a dip. There were some disconcerting declines at GM, as sales of the Cruze sedan fell nearly 50 percent, and some questioned the strength of its new pickup rollout.
Still, 1.1 million light vehicles were sold in the country last month, and that’s healthy from anyone’s perspective. The seasonally adjusted annual rate now stands at 15.3 million, down from 16.1 million earlier in the year, meaning this remains an exceptional year for anyone in the American car biz.
While some question the accuracy of its predictions, the ADP National Employment Report estimates that the U.S. economy added 166,000 private-sector jobs in September. According to the report, 74,000 of those came from small businesses, while 28,000 came from medium business and 64,000 from large businesses.
Broken down by sector, 1,000 new jobs came from manufacturing, while 4,000 came from financial activities and a healthy 16,000 from the construction industry. Overall, most came from the service industry. This trend of low-wage job growth will continue as the holidays draw nearer.
This is the data we’ll have to rely on for the time being, as this message is posted on the Bureau of Labor Statistics website: “During the shutdown period BLS will not collect data, issue reports, or respond to public inquiries. Updates to the site will start again when the Federal government resumes operations.”
Aside from the toll on 800,000 individuals suddenly on furlough, shuttered Social Security offices, business relying on tourism from national parks and those working in contract with the federal government, there are countless unforeseen consequences of a government shutdown. Government-backed home loans and general consumer confidence are just two factors that could have a major impact on the economy depending on the shutdown’s length.
And then there’s this: Dean Maki, chief U.S. economist for Barclays bank, has estimated in a Businessweek story that federal government policies dragged our economy down 1 percent last year, and 1.8 percent last year.
Let us join the near-unanimous call for this impasse to end quickly.
We’ve said it here many times before: our economic recovery is fragile, but has shown impressive progress in 2013. We’ve seen unemployment claims coming down steadily as job creation picks up. Shutting down the federal government, with a looming threat of a default on the country’s obligations, is an unnecessary stumbling block in our path. By some estimates, it will cost our economy $300 million per day.
This fiasco hasn’t persisted long enough to become a true a disaster, but it could with time. Either way, it’s entirely man-made, and bad for business.