The Shutdown and the Economy

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By on January 28, 2019 in Current Events with 0 Comments
Sign on a barrier gate that reads 'Because of the federal government shutdown, all national parks are closed' in front of the Lincoln Memorial in Washington, DC

Photo by Scott Kirkwood/NPCA

The partial government shutdown has been a strain on Federal employees, Federal contractors, and those doing business with the government. While there is lots of anecdotal evidence that the shutdown hurt the economy, it will be challenging to accurately measure the economic impact on the nation.

On February 1, data will be released that may give us a clearer view on how the shutdown effected the national economy. The Bureau of Labor Statistics will publish employment and unemployment information for the month of January, which will be the first indicator on how the national economy was affected by the partial government shutdown that began in late December.

BLS’s monthly Employment Situation report consists of two different surveys, the CES and CPS. Since the shutdown continued for most of January, for both surveys the shutdown extended through BLS’s January reference week, which is the pay period that includes the 12th of the month.

The Current Employment Statistics (CES) survey (the payroll survey) produces detailed industry estimates of nonfarm employment, hours, and earnings of workers on payrolls.

The Current Population Survey (CPS) is a monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics and provides information on labor force, employment and unemployment, persons not in the labor force, and is used to calculate the national unemployment rate.

Collection of the data for both surveys was not affected by the government shutdown. Information for the CES is collected directly by BLS, which did not experience any lapse in funding. Information for the CPS is collected by the Census Bureau but mostly funded by BLS, so collection continued during the partial shutdown of the Census Bureau.

The payroll survey will count Federal government employees who were working during the payroll period, but who will not be paid until funding is available, as employed. Furloughed federal employees who were not working during the reference period, but who will be paid once funding is available, will also be counted as employed by the payroll survey.  According to BLS guidance, they are counted as employed because the Government Employee Fair Treatment Act of 2019 requires that furloughed employees be compensated for the time spent on furlough during the reference period.

Beyond Federal government employees, any worker who did not work or receive pay for the entire pay period will not be included in the employment counts. Average weekly hours for the private sector employees may be impacted if employees’ work schedules were changed as a result of the lapse of appropriation. Hours and earnings estimates are not available for the government sector.

In contrast, the household survey, which produces the unemployment rate, may more fully reflect the effects of the partial shutdown. Furloughed federal employees who did not work during the entire reference week will be classified as unemployed on temporary layoff. (People on temporary layoff need not be looking for work to be counted as unemployed.) Federal government employees who worked, but who will not be paid until funding is available, will be classified as employed.

Similar to federal employees, any other workers who did not work for the entire reference week because of the lapse of appropriation will be classified as unemployed on temporary layoff. (People on temporary layoff need not be looking for work to be counted as unemployed.)

People who worked at any point during the reference week, who usually work full time but have had their workweek drop below 35 hours because of a lapse of appropriation, will be classified as employed part time for economic reasons because of slack work/business conditions.

Since the household survey is a nationwide sample of 60,000 households, which translates into approximately 110,000 individuals, it is impossible to predict how many furloughed Federal employees are in the sample.

Overall, the December household survey report that was conducted before the shutdown showed approximately 163 million individuals in the labor force with nearly 6.3 million listed as unemployed and a seasonally adjusted unemployment rate of 3.9 percent.

Since July, the monthly national unemployment rate has stayed below 4.0 percent. Economists will be looking to see whether the numbers change due to the shutdown with the hope that BLS will be able to provide some additional guidance on how the shutdown affected its sample.

Looking ahead, other key economic indicators will be Personal Income and Outlays and the Gross Domestic Product. Both of these indicators are produced by the Bureau of Economic Analysis (BEA), which is part of the Census Bureau and was included in the shutdown.

The January Personal Income and Outlays release is scheduled for March 1, and the 1st quarter 2019 Gross Domestic Product is scheduled for release on April 26. Both dates assume that the partial shutdown will not resume in mid-February when the current spending bill lapses.

Federal employees and contractors caught up in the shutdown know how the economic toll of the shutdown affected them as individuals. Its effect, or lack of effect, on the national economy may help determine the level of commitment by politicians to avoid future government shutdowns.

© 2019 Michael Wald. All rights reserved. This article may not be reproduced without express written consent from Michael Wald.

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About the Author

Michael Wald is a public affairs consultant and writer based in the Atlanta area. He specializes in topics related to government and labor issues. Prior to his retirement from the U.S. Department of Labor, he served as the agency’s Southeast Regional Director of Public Affairs and Southeast Regional Economist.

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