A new report says that the government shutdown has cost the country about $11 billion in gross domestic product — and will impact the United States’ economic growth for the rest of the year.
In a report released on Monday (January 28), the Congressional Budget Office said that while around $8 billion of the funds lost will be recovered as employees return to work, $3 billion (or 0.02 percent of gross domestic product in 2019) will never be recovered.
“As a result of reduced economic activity, the CBO estimates, real (that is, inflation-adjusted) gross domestic product (GDP) in the fourth quarter of 2018 was reduced by $3 billion (in 2019 dollars) in relation to what it would have been otherwise,” according to the report. “In the first quarter of 2019, the level of real GDP is estimated to be $8 billion lower than it would have been — an effect reflecting both the five-week partial shutdown and the resumption in economic activity once funding resumed.”
But the shutdown will have larger implications on the economy, most notably a fall in consumer spending due to unpaid federal workers reducing their expenses. And although federal employees will receive back pay now that the government is back at work, most contractors will not.
“When you do this sort of thing, you affect the morale of federal workers, and it may have an impact on the quality of federal workers going forward,” said CBO Director Keith Hall in a briefing with reporters, according to CNN.
Earlier this month, Federal Reserve Chairman Jay Powell warned that an extended government shutdown could be damaging to the U.S. economy. He added that the shutdown would make it more difficult for the Fed to analyze the economy’s health because certain agencies tasked with monitoring the economy were also affected.
The Bureau of Economic Analysis, for example, was scheduled to put out its first estimate for fourth quarter GDP this week, but those plans are now indefinitely delayed.